Industrial Real Estate

Rising 0.6%, to 5.2%, the firm that the the industrial real estate vacancy rate decrease was driven by the pairing of muted demand and speculative constructions persisting at a healthy rate. What’s more, it added that this marks the first time the industrial vacancy rate has been above 5% going back to the third quarter of 2020, but it is still short of the 6.4% long-term 15-year average.

The national vacancy rate remaining low, at 4.8%, compared to a historical expansionary average of 6.1%, even as the pace of new deliveries quickened and added 70 basis point to market vacancies

The research paper, entitled “Future Proofing the Global Supply Chain:  How AI, Automation and Other Technologies Are Impacting Efficiency,” noted that logistics real estate investments outpaced revenue growth by 57% over the past decade despite advancements in automation and data analytics, which it labeled “the supply chain productivity paradox.”

There was a 36% annual decline in 1 million square-foot-plus leasing activity, which drove an 18% decrease in total industrial space leased, in the first half of the year, at 373 million square-feet. And CBRE said that the number of 1 million square-feet deals dropped from 36, in the first half of 2022, to 23, for the same period in 2023, amid economic uncertainty and waning occupier urgency to hold additional inventory.

San Francisco-based real estate investment trust company Prologis made a major acquisition this week, in rolling out its plans to acquire roughly 14 million square-feet of industrial properties “from opportunistic real estate funds” affiliated with New York-based global real estate investor Blackstone Real Estate.

The most recent edition of the Industrial Business Indicator (IBI), which was issued by San Francisco-based real estate investment trust company Prologis, presented what could be viewed as a somewhat mixed outlook for the industrial real estate sector, in terms of vacancy, rents, and space utilization, among other factors.

The U.S. industrial real estate market added 89 million square feet (MSF) of vacant supply, in the first quarter, which CBRE said represents the single largest quarter-over-quarter increase on record. What’s more, that subsequently led to the overall vacancy rate seeing an increase for the first time, going back to the second quarter of 2009, with a 50-basis point increase to 3.5% that still trails the 5.0% 10-year average.

CBRE found that the largest 100 industrial lease transactions in 2022 included a record-high 63 deals for 1 million square-feet or more—known as “megawarehouses”—topping the 57 deals recorded in 2021. What’s more, it added that the average size of the top 100 leases was 1.07 million square-feet (MSF), supplanting the previous record, of 1.05 million MSF, set in 2021.

Some experts argue that low unemployment, record corporate earnings, and GDP growth in Q3 indicate that the U.S. is not yet in a recession, many economists agree that a recession is coming soon.

In a research brief, entitled “Industrial Facilities Near Airports Command Rent Premiums,” CBRE explained that companies are locating distribution operations closer to airports, or air cargo ports, in order to counter various challenges, especially increasing transportation costs, which it said account for 45%-to-70% of overall supply chain costs—based on data issued by the company’s subsidiary CBRE Supply Chain Advisory. This represents a steep uptick compared to occupancy costs, which account for 3%-to-6%, said CBRE.

Under the terms of the deal, the all-stock transaction, which Prologis said is valued at approximately $23 billion and was approved by Prologis and Duke shareholders, includes the assumption of debt, with the company adding it “expands Prologis’ presence in key U.S. markets.

The Great Decoupling refers to an exodus of production from China as businesses seek to improve supply chain resilience, these circumstances have been beneficial for a variety of other countries in Southeast Asia, including India, Vietnam, and Malaysia, among others.

If the Inflation Reduction Act is to meet its goal of reducing carbon emissions by 40% by 2030, the industrial real estate sector will have a part to play.

As warehouses spring up nearer to residential properties, those residents have begun to push back with a battle cry that’s hardly new to commercial real estate professionals: “Not in my backyard!”

Although the global supply chain has shown signs of improvement in recent months, years of supply chain volatility have created a lasting impression on industrial real estate.