Projected rents are more than adequate in many markets to justify additional development of warehouses and distribution centers, according to a new report from CBRE.
CBRE analyzed the gap between pro forma rents in various markets – the rental rates that developers can reasonably expect to obtain on newly built warehouses – and breakeven rents, which are the rents they’d need to cover overall development costs. In the 10 major markets that CBRE examined, the former exceeded the latter by 20 to 40 percent.
These spreads also confirm that the current market for Industrial & Logistics real estate has growth remaining. Typically, a sign of waning momentum for a market comes when spreads between pro forma and breakeven rents narrow or vanish.
CBRE’s analysis found the largest rent spreads in cities such as Chicago (43 percent), Atlanta (38 percent), Phoenix (35 percent) and Pennsylvania’s I-78/I-81 corridor (30 percent).
“Rents along the PA I-78/I-81 Corridor continue to grow as warehouse space gets absorbed,” said Vincent Ranalli, senior vice president, CBRE. “Rents in most of our submarkets have exceeded peak levels and are establishing new highs. Developers remain confident in the fundamentals of the market and continue to build new product on a speculative basis.”
To view the report, click here.
CBRE analyzed the gap between pro forma rents in various markets – the rental rates that developers can reasonably expect to obtain on newly built warehouses – and breakeven rents, which are the rents they’d need to cover overall development costs. In the 10 major markets that CBRE examined, the former exceeded the latter by 20 to 40 percent.
These spreads also confirm that the current market for Industrial & Logistics real estate has growth remaining. Typically, a sign of waning momentum for a market comes when spreads between pro forma and breakeven rents narrow or vanish.
CBRE’s analysis found the largest rent spreads in cities such as Chicago (43 percent), Atlanta (38 percent), Phoenix (35 percent) and Pennsylvania’s I-78/I-81 corridor (30 percent).
“Rents along the PA I-78/I-81 Corridor continue to grow as warehouse space gets absorbed,” said Vincent Ranalli, senior vice president, CBRE. “Rents in most of our submarkets have exceeded peak levels and are establishing new highs. Developers remain confident in the fundamentals of the market and continue to build new product on a speculative basis.”
To view the report, click here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 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.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas is the world’s largest commercial real estate services and investment firm (based on 2019 revenue). The company has more than 100,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 530 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.
