01/25/2022 | News release | Distributed by Public on 01/26/2022 10:07
The sharp imbalance between supply and demand for new warehouses has significantly shortened the length of time between warehouse delivery and stabilization. This report explores the dynamics driving this trend, and speculative warehouse construction and stabilization metrics in 15 key U.S. logistics locations.
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The sharp imbalance between supply and demand in the U.S. industrial sector is driving insatiable tenant interest in new-construction availabilities, which are in short supply. A survey of 23 key industrial markets found:
These dynamics are reflected in the shortened duration between warehouse delivery and stabilization*. For buildings that have reached stabilization, the average length of time between a speculative warehouse delivering to the market and being fully leased was less than a single quarter in 2021, with many preleasing well before delivery. This duration is down from an average of 3.9 quarters in 2015. Across the markets surveyed, 25% of spec space delivered in 2021 had yet to reach stabilization by year-end, the majority of which delivered in the second half of the year. Some landlords of newly-delivered properties are delaying leasing decisions to achieve the most current market rents - in some regions with extremely tight vacancy and high demand, the velocity of rent growth is such that a moment after a lease signs, the contract rate is already under-market.
The construction pipeline rose to half a billion square feet underway in Q4 2021, the most on record. Speculative warehouses account for approximately 77% of that volume, in line with the 5-year average share. As disruption to construction timelines subsides and speculative deliveries increase, experts expect the average lease-up period to gradually lengthen over the next few years as tenants are presented with more options. Tenants with move-in requirements this year will face a continuing environment of scarcity and competition in most markets, as supply-chain and labor challenges persistently impact delivery timelines.
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