Warehouse vacancy rates are sinking and rents are soaring as a surge of imports is boosting demand for space, the real estate firm CBRE Inc. said today.
At the same time, that trend is being exacerbated by retailers competing to claim industrial space near seaports to mitigate future supply chain disruptions even as they continue to recover from pandemic closures and the Suez Canal blockage.
Together, those two market forces are putting industrial markets at major U.S. port cities under strain and pushing rental rates up to record highs. The increased demand for warehouse space in seaport markets had forced their average vacancy rate to 3.6% at the end of 2020, one percentage point lower than the national average, CBRE said.
Despite the tight conditions, retailers and brands have growing piles of inventory to store, as shown by import surges including year-to-date loaded imports at the ports of Long Beach and Los Angeles increasing 32.1% and 24.2%, respectively. East Coast facilities are also up, including Savannah (17.7%), Port of Virginia (16.8%), and New York and New Jersey (13.2%).
“With all of the volatility and consumer changes of the past year, retailers and manufacturers have learned to build up a healthy safety stock of inventory to limit supply chain disruptions,” John Morris, executive managing director and leader of CBRE’s Americas Industrial & Logistics business, said in a release. “While this will help protect consumers, it has put a strain on seaport industrial markets, as they need more supply to meet this surging demand. Without more construction, we will see rental rates continue to soar.”