Ecommerce stores warehouse

Warehouse rents have risen up to 40% in the past year, landlords say

  • Warehouse rents have jumped 12% on average over the past year, to a record high, according to CBRE.
  • In New Jersey, prices have soared nearly 40% in the past 12 months, CBRE said.
  • Experts expect the dramatic increases to continue as demand grows across all sectors.

At the end of last year, Amazon signed a lease for 200,000 square feet of a warehouse complex just outside St. Louis, paying rent around $4.50 a square foot.

It may not seem like much. But according to building owner Alfredo Gutierrez, that’s 20% more than Amazon would have paid for the space a year ago.

Gutierrez thinks that if he had signed the deal today, a few months later, Amazon would have had to spend nearly 10% more than he paid.

“I’ve never seen a rental market more favorable to warehouse owners in my 30-year career,” said Gutierrez, 58, chief executive of SparrowHawk, an industrial real estate investment firm. The Houston-based company has about 6 million square feet of warehouses in the Midwest, including the Sauget Business Park, where Amazon recently signed the lease.

“Tenants are taking up 20% or 30% more space than before so they can store additional inventory due to the supply chain crisis,” Gutierrez said. “The supply of new spaces cannot catch up with demand.”

In addition to logistics and manufacturing tenants, Amazon and other retailers with large online presences are vying for space to store additional merchandise. Especially now, many customers expect super-fast delivery, so e-commerce giants have increasingly invested in warehouses to reduce the time it takes to get products to the customer’s doorstep, known as the last mile delivery name.

Additionally, the disruption of the supply chain means businesses prefer to store items closer to their destinations, increasing the need for excess space.

As a result, warehouse rents across the country rose at a record pace that continued through the first quarter of 2022, according to landlords, leasing brokers and market data.

The big increases come on top of years of gains as industries that take up a lot of warehousing space, especially e-commerce and logistics, have grown steadily in America. The pandemic has supercharged this by encouraging more shoppers to turn to produce and groceries online, requiring an ever-expanding network of warehouses for storage, distribution and delivery.

In an earnings call on Thursday, Amazon chief financial officer Brian Olsavsky said the company has “too much space right now.” But few experts expect the company to shrink its mammoth 340 million square foot portfolio.

Experts also say the pandemic and events such as Russia’s invasion of Ukraine have also strained supply chains, prompting warehouse users to take up more space so they can store more. of goods and guard against shortages.

In the first quarter of 2022, overall warehouse asking rents rose 3.7%, to a record average of $8.94 per square foot, according to real estate services firm CBRE. Average asking rents were 11.8% higher than a year ago. But in some markets, the gains have been much more dramatic.

Warehouse rents jumped up to 40% in New Jersey, ‘a flagship market for the country’

New Jersey has one of the largest and fastest growing industrial markets in the country due to its proximity to New York and Philadelphia.

Warehouse rents there jumped 20% between the fourth quarter of 2021 and the first quarter of 2022, to just over $12 per square foot, according to a recent CBRE report on that market. That was nearly 40% higher than the average asking rent in the state a year ago.

CBRE said more than 60% of first quarter rental activity came from logistics, retail and wholesale tenants. Beverage maker and distributor Keurig Dr Pepper has signed a deal for 500,000 square feet, the largest of the quarter. Kiss Products, a maker of pressure nails, false eyelashes and other beauty products, took 425,000 square feet. And Lasar Logistics signed a 390,000 square foot lease in southern Brunswick.

“New Jersey’s industrial market is a flagship market for the country,” said Rob Kossar, vice president of real estate firm JLL, which leads rental and warehouse sales in the northeast. “And we’ve never had such growth in rents before.”

Kossar said data from JLL revealed that warehouse rents in the state are up an average of about 30% from a year ago. JLL expects to release its own warehouse rental statistics for the quarter shortly.

“If you take rent growth over the last decade, it’s been closer to 10% per year on average,” Kossar said.

Tenants lock in warehouse space before it gets even more expensive

Prologis, a San Francisco-based industrial real estate company that owns nearly one billion square feet of industrial space, recently announced that rents in new leases in its U.S. portfolio signed in the first quarter averaged 41.5 % higher than previous tenants. had paid, a record increase.

The company’s chief financial officer, Tim Arndt, said on an earnings call this month that U.S. warehouse rents rose 8.5% in the first quarter and estimated that rent growth for the year would be 22%.

Kossar said while tenants may be shocked by the stickers, concerns about further increases have prompted many to quickly rent space.

“We could see increases of 30% this year and another 30% next year,” Kossar said. “That’s part of why we’re seeing such demand. If a tenant has a need, they’ll take space now rather than paying 60% more in a few years.”