A recently released report by commercial brokerage firm CBRE indicates that the average age of U.S. warehouses is 43 years and they do not possess the highly specialized facilities that logistics firms and high-growth occupiers demand. The CBRE report notes that nearly 28% (3.4-million-square feet) of warehouse stock that is 50 years old or more is fueling the record 627 million square feet of new warehouse space currently under construction in the United States so far this year.
CBRE states that major e-commerce and retail distributors require highly functional modern facilities to process a high volume of goods every day. “Demand from these occupiers alone more than justifies the record level of new development,” the report noted.
That national trend in increased development and particularly spec development is playing out in Orange County, with major developers submitting plans and moving forward with significant projects to meet the high demand from e-commerce users.
That is not to say that the nation’s old in-fill inventory is wanting for tenants. CBRE reports that 95% of warehouse space in the country is occupied, mostly by local or regional logistics operators that are located near their customers and labor force. Locally, CBRE says that the Northern and Central New Jersey markets have one of the oldest warehouse inventories in the county with an average building age of between 47 and 60 years.
“Only 6% of total U.S. warehouse buildings have been built within the past 10 years, yet they account for 18.6% of total inventory by square footage due to a more than 25% increase in average size,” the CBRE report states. “Large occupiers generally demand big-box facilities of at least 200,000 sq. ft. to serve a growing online consumer base, hold more inventory and accommodate voluminous distribution operations near ports of entry and manufacturers.”
In a Globest.com report, Brian Gallagher, Vice President, Corporate Development at Graycor, says that changes in distribution strategy, consumer behavior and e-commerce and increased manufacturing are all driving distribution and warehouse construction.
“As a result, we are seeing an increase in investment in speculative warehouses. Much of the inventory under development is quickly being absorbed by retailers and third-party logistics companies,” he said.
Stephen D. Stein, Co-founder/President Capital Markets, Tauro Capital Advisors, added that there has been a substantial increase of interest from equity sources looking to partner with seasoned developers, and borrower demand for acquisition financing has never been greater.
“This is an asset class that is perceived as safe with the prospect of long-term demand due to a shortage of inventory,” Stein said.
Locally, Orange County is experiencing robust speculative development activity—national developers such as Scannell Properties, Treetop Development, GFI Partners, Crow, and Sansone Group are all considering or moving forward with speculative development.
Orange County Partnership officers add that local developer Frassetto Group has broken ground on an 80,000-square-foot spec building, and RDM Group is currently securing entitlements for a multitude of spec industrial buildings in the county.
For the full CBRE report, go to: https://www.cbre.com/insights/briefs/aging-warehouse-inventory-justifies-record-development
For the full Globest.com story, go to: https://www.globest.com/2022/09/21/aging-us-warehouses-are-driving-record-development/?amp=1
