Warehouse vacancy rates sink to 27-year low
Renters struggle with soaring rents, labor shortages, Savills report says.
The nation’s industrial real estate market continues to set marks for low vacancy rates and high rents despite a “flatline” of e-commerce growth as many Americans return to their pre-pandemic routines, according to commercial real estate firm Savills.
Those steep vacancy declines and rent spikes are driving record development of new warehouses and other facilities, the firm said in its “U.S. Industrial Market Update - Q1 2022.” Developers are currently building nearly 750 million square feet, up from the 507 million square feet they were creating in the same quarter last year.
“With vacancy rates as low as 1.6% in Southern California and top markets experiencing double-digit rental growth, the industrial market continues to be challenging for tenants. National construction activity is up 48% from one year ago, which should help ease conditions going forward with current pipelines as high as 73 million square feet in Dallas-Fort Worth,” Savills said in its report.
However, while all that new warehouse space is still under construction, U.S. industrial vacancy sank to just 4.2% in the first quarter, a 27-year low after declining another 130 basis points over the past year.
Those pressures have led to industrial space being essentially “sold out” in coastal locations near maritime ports, where renters now encounter double-digit rent growth in top markets like Southern California (up 18.8%), northern New Jersey (up 16.1%), and South Florida (up 15.8%).
Even when occupiers are lucky enough to find space to rent, they face the additional challenge of hiring enough workers to run the warehouses, Savills said. Average monthly warehouse job postings were up 126% over the past year compared to 2019.
In response, employers are offering higher wages for warehouse jobs including laborers and freight, stock, and material movers. The average advertised wage for warehouse jobs has risen steadily from just below $15 per hour in March 2021 to just over $17 per hour in March 2022.
Sorted by employer, the companies that have posted the most warehouse job openings since 2015 are: Amazon (4,125,477), FedEx (1,397,790), UPS (583,081), The Home Depot (310,477), and Lowe’s (146,599), Savills said in the report.