US Has Fastest-Rising Rents For Top-Quality Warehouses, Distribution Centers, But Cost Still Less Than Other Regions
U.S. industrial hubs posted the strongest growth in prime logistics rents for the past year, and Asian markets remained the world’s most expensive as demand for top-quality warehouses and distribution centers continued to outpace supply globally, according to a new report from CBRE.
CBRE’s second-annual Global Industrial & Logistics Prime Rents report found that prime rents in 70 major markets across the globe increased by 2.2 percent on average in Q1 2017 compared to the same period a year ago. That growth rate continues a string of several years of growth in the measure.
The past year’s steepest gains came in the Americas, specifically the U.S., where prime rents are low compared to other regions and demand is robust for distribution space amid the buildout of e-commerce-fulfillment networks. Five of the 10 markets with the biggest prime-rent gains of the past year are in the U.S., led by Seattle with a gain of 16.9 percent, Pennsylvania’s Lehigh Valley (up 10 percent) and Oakland (up 9.3 percent).
“As consumer demand for goods continues to increase and the demand for well-located distribution centers close to core population centers outpaces supply, rents will continue to rise,” saidWilliam Wolf, CBRE executive vice president, based in Allentown.
Meanwhile, traditionally land-constrained markets, especially those in Asia, are well represented among the world’s most expensive prime logistics rents. Hong Kong tops the list this year at $32.40 per square foot per year, with Tokyo second ($18.22) and London third ($17.86). Six of the 10 most expensive markets are in the Asia Pacific region (APAC).
Two U.S. markets cracked the 10 most-expensive markets: Oakland was ninth at $8.73, and Los Angeles/Orange County was 10th at $8.52.
“Prime logistics rents across the globe continue to increase not only because of healthy economies in various regions but also because the growth of e-commerce has created a structural shift in the marketplace,” said David Egan, CBRE Global Head of Industrial & Logistics Research. “E-commerce now is a permanent factor in the market, and that additional, solid demand for top-quality distribution centers will keep prime rents rising as long as new supply continues to lag.”
CBRE defines prime logistics rents as the highest achievable rent for industrial distribution space of the highest quality and specification, and in the best location within each industrial market.
On a regional basis, the Americas registered the most growth in prime logistics rents: 3.8%. That is followed by APAC’s 1.4% gain and a 1.2% gain for Europe, the Middle East and Africa (EMEA).
In the U.S., prime rents have been driven by both strong demand for facilities and, in some markets, limited new supply. Seattle’s supply constraints contributed to its world-leading growth in prime rents last year. Other markets, such as Pennsylvania’s Lehigh Valley, benefit from strong demand due to their close proximity to major population centers.
Percentage Change In Prime Industrial & Logistics Rent
Year-over-year growth from Q1 2016 to Q2 2017
|City||Country||Region||Prime Rent Growth|
|PA’s Lehigh Valley||U.S.||Americas||10%|
To download the full report, click here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.