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Industrial Warehouse Space, Distribution Center Demand Remains Strong

Posted by Heidi Schwartz

Despite anaemic job growth, the demand for industrial warehouse space and modern distribution centers remains strong, according to Colliers International’s Global Industrial Midyear 2013 Highlights Report, released on July 8, 2013. London, Hong Kong and Singapore take the lead in industrial warehouse rents, while around the world, industrial buildings near full occupancy.

Key Findings

Colliers market experts point to increases in industrial demand, specifically in Asia and the Americas, and highlight causes for stagnation in other areas:

  • Modern, Build-to-Suit in High Demand: Institutional investors’ anxiety about the multifamily market has spurred demand for modern warehouse properties near ports and inland distribution centers. New space is often build-to-suit for major retailers and manufacturers, as an estimated 40% of existing U.S. warehouse space is old enough to be considered functionally obsolete.
  • Construction Booming in Mexico: Similarly, Mexico has seen slowed economic growth and experienced a slight increase in vacancy after several industrial facilities were vacated. However, 14 industrial properties are under construction in the market, and once complete, they will add more than one million square feet of inventory. An additional two million square feet are in the planning stages and expected to be complete by 2015.
  • South American Market Matures, Moves Away from the City: While São Paulo seems to have stabilized, the Bogotá market absorbed more than two million square feet of warehouse space in the second half of 2012, which was 28 percent more than the same period in the previous year. Since 2008, industrial developments have moved toward the city’s outskirts, producing 99% of available land.  In fact, roughly 570 acres of land are available in the market – the highest ever recorded.
  • China Sees Long-Lead Lease Renewals: Long-term, increased consumer demand will drive the need for high-quality logistics properties throughout Asia Pacific industrial sectors. While some construction projects aimed at alleviating growing pains are in the works, several are not expected for completion until 2014. As a result, many logistics companies, for example in Hong Kong, have had to negotiate with landlords for lease renewals about one year ahead of lease expiration.
  • India Invests in Multi-Brand Retail Trading: Economic growth remained stagnant in India. However, industrial activity is slated to improve after a 51 percent foreign direct investment in multi-brand retail trading goes into effect, along with the government-proposed National Investment and Manufacturing Zones.
  • Prime Rent Increases in Germany: The availability of modern space across Germany is limited, which has driven prime rent increases in major cities. Munich in particular has seen growth among automotive manufacturers, while the high purchasing power in the region has given retailers the opportunity for expansion.

“While the North American market has seen solid performance, from a global perspective, industrial market activity has been somewhat patchy through the first half of 2013,” said KC Conway, Chief Economist | USA.  “While markets like Hong Kong and Sydney are nearing full occupancy, other markets like Seoul are experiencing uneven industrial demand. Latin America and EMEA are also working to manage some imbalance in supply and demand. Through the end of the year, we expect to see market resilience, increased demand for logistics and distribution center space, and development driven by build-to-suits.”

A full version of the 23-page report, including a list of the top 10 industrial warehouse rents and cap rate averages around the world, is available by clicking here.

 

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About The Author

Schwartz joined Group C Media in April 1989 as managing editor of Today's Facility Manager. In September 2012, she transitioned to a new role dedicated to developing online content for Business Facilities and Today's Facility Manager. Schwartz can be reached at [email protected]

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