Industrial real estate, and more importantly, logistics real estate, serves as the conduit everyday consumers have become accustomed to receiving goods and services. Warehouses provide for product storage, truck terminals and distribution centers bring the product one step closer to the consumer while storage yards for trucks, trailers, and containers allow for the aggregation of equipment necessary to match the product to the consumer. The consumer, however, is the catalyst that dictates how each of these components thrives or declines, and ultimately interacts.
In the past decade, the level of disposable income for the average household has increased by nearly sixty-five percent (11,000 USD Billion to 18,000 USD Billion) according to the Bureau of Economic Analysis. During this period, the level of consumer purchases through online mediums has more than doubled, which has led to an increased demand for warehouses, distribution centers, and all forms of logistic equipment.
In the Northeast region of the US, specifically, the port areas of New York and New Jersey, consumer needs, coupled with both the effects of pandemic related supply chain concerns and tariffs, have created a hyper demand scenario in which warehousers have seized opportunities to capture real estate as it becomes available. Not only has this led to absolute premiums for existing real estate but for the opportunists with the wherewithal and time horizons available to them, the push for more space has created an insatiable demand for raw land, redevelopment sites, and conversions all geared toward the creation of the following concrete box.
With all of this as an effort to secure space ahead of long-awaited arrivals of cargo destined for repeat public consumption, to keep with the pace of demand, trucking outfits have had no choice but to increase their fleets while drayage firms have had to expand their operations thus exacerbating the need for land sites.
As such the cost of occupying, let alone acquiring these facilities and sites has risen tremendously. Warehousing lease rates in the region have increased upwards of thirty to fifty percent year on year with new build or facilities with abundant land hitting the highest mark. Pure surface parking sites in several cases have seen growth in excess of one hundred percent over the same period.
While the first quarter of 2022 revealed a decline in the overall gross domestic product, consumer demand remained strong. As the engine of the US economy, it is the consumer demand that will continue to dictate the fate of logistics real estate. So long as the physical demand for products that pass through the supply chain exists, logistics real estate will be in need and in turn enjoy a robust growth trajectory for the foreseeable future.
Featured in MARE Journal May 2022 issue https://online.flippingbook.com/view/935432772/14/