Tag Archive for: new construction demand

Labor Shortages, Land Availability Will Pressure Industrial In 2022

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Labor scarcity will be among the major headwinds driving industrial commercial real estate decisions in 2022 as record shortages challenge distribution channels and unemployment hits a near-historic low.

ā€œWith industrial related hiring already at all-time highs, the continued need for labor to service growing e-commerce demands, combined with an economy at nearly full employment, is exacerbating the labor shortage for distribution workers in many markets,ā€ a new Colliers report notes, adding that the US unemployment rate is now near a 50 year low of 3.5%.

And while so far, the industrial sector has managed to post record growth, the labor shortages span ā€œnearly all demographic groups and affect the entire American economy,ā€ and continuing lows will slow the rate of economic growth and slow manufacturing output, Colliers predicts.

ā€œWhile automation and advanced technologies are becoming more prevalent and affecting industrial employment, the future will still rely on highly skilled labor to operate complex systems and machinery, alongside roboticsā€”labor that is increasingly more difficult to find,ā€ the Colliers report notes.

In addition, scarce land availability will continue to impact the sector.Ā Prologis reportsĀ that construction starts have risen to an all time high of 120 million square feetĀ in the sector, but the firm notes that new supply is mainly concentrated in low-barrier secondary and tertiary markets and the outlying submarkets of inland markets.

While a record level of new supply is expected by the end of 2022ā€”including massive build-to-suit projects for e-commerce suppliers and big-box chainsā€”land near big population centers is increasingly scarce.

ā€œCompanies seem willing to pay a premium price for land with fierce competition for developable sites,ā€ Colliers analysts note. ā€œThis competition is also driving up industrial rents, especially for logistics space near US seaports.ā€

Colliers also notes that facilities in excess of 2 million square feet are increasingly popular in dense markets as retailers attempt to establish footholds closer to consumers and shorten delivery times. The firm is tracking 12 such big-box multi-story industrial mega centers currently under construction, and notes that a vast majority are for Amazon.

 

Source: GlobeSt.

No Sign Of Glut As Industrial Development Tops 390M Square Feet

Developers completed construction of 289 million square feet of industrial and logistics real estate in the U.S. last year, but any concerns of oversupply are tempered, as only 39 percent of space in new construction was available.

Thatā€™s a major factor in vacancies staying near all-time lows in 2019, according to a new report from CBRE. The CBRE analysis finds that at 22.2 percent, Central and Northern New Jersey ranked among the top five markets nationally with the lowest vacancy rate for 2019 completions.

Deliveries outpaced the 255 million square feet of new absorption, but with robust leasing from occupiers, especially ecommerce and retail firms that often require modern building design and amenities, supply and demand dynamics remain healthy. A vacancy rate of less than 50 percent is considered healthy for newly delivered industrial properties.

ā€œAs New Jerseyā€™s industrial market continues to break leasing and rental rate records, new developments are being snapped up by space users at a rapid pace,ā€ said Thomas Monahan, Vice Chairman. CBRE. ā€œWhile the development pipeline remained robust with 28 buildings and 10.3 million suqare feet currently under construction, the demand for high quality product is far outpacing supply.ā€

Another major factor contributing to the strong absorption of new construction is the increase in built-to-suit development ā€” the construction of space for a specific space user. This segment made up 28.1 percent of new construction activity, as companies increasingly need unique requirements to meet their specific demands.

In markets with over four million square feet of new development, Kansas City finished 2019 with the lowest overall vacancy rate for 2019 construction completions at 7.3 percent, followed by Miami, Baltimore, and Greenville, SC, which all had vacancy rates for newly constructed product under 20 percent. Dallas-Fort Worth was the strongest core market, with nearly 75 percent of the 25 million square feet completed in 2019 taken.

Supply fundamentals should remain stable this year, as already 33 percent of the 309 million square feet under construction nationwide is already accounted for. A preleasing rate of 25 percent for under-construction product typically are indicative of a solid leasing environment.

 

Source: Real Estate Weekly