Logistics rents in Americas increasing the fastest, with six of the top 10 global markets for growing prime logistics rents located in the U.S. | Hong Kong, Tokyo, London top ranks of most expensive
Los Angeles - May 16, 2016 – Voracious global demand for e-commerce fulfillment centers and distribution centers fueled a 2.8 percent year-over-year increase in prime logistics rents globally, led by double-digit percentage gains in U.S. coastal markets, according to CBRE Group Inc.’s inaugural Global Prime Logistics Rents report. Six of the top 10 markets with the fastest growing prime logistics rents globally were in the U.S., led by Oakland, Calif., with a nearly 30 percent gain.American seaports and inland ports aren’t among the world’s most expensive for logistics rents, but they did post the largest gains in 2015 due mostly to the increasing flow of goods into and throughout the region from online sales. In addition to Oakland in the No. 1 spot, U.S. cities in the top 10 for fastest growing prime logistics rents include New Jersey at No. 2; the Inland Empire at No. 3; Los Angeles-Orange County at No. 7; Dallas-Fort Worth at No. 8; and Atlanta at No. 9.
Another two of those top 10 for rent increases are elsewhere in the Americas: Santiago, Chile, and Ciudad Juárez, Mexico.
The sharp rise in prime rents in the Americas was largely due to massive growth in U.S. coastal markets, where relentless occupier demand drove up pricing. In Oakland, desire for quality premises is the dominant factor for inner-bay logistics users despite the high cost. New development in some markets, such as the Inland Empire, is commanding premium rates. In Latin America, Santiago and Ciudad Juarez notched increases in prime rent of 10.9 percent and 10.2 percent, respectively. In São Paulo, prime rents were down 10.5 percent year-over-year.
Much of the upward pressure in rents in logistics markets in the Americas and globally is stoked by a supply chain arms race of sorts among retailers, shippers and suppliers seeking accommodate the continued growth of e-commerce. In heavy demand are modern distribution centers and fulfillment centers with features such as a high loading dock ratio and clear ceiling heights of at least 26 feet to accommodate high-tech stacking racks and automated storage-and-retrieval systems. Many such facilities are being built close to large population centers, where land costs are high.
“Global consumer demand is strong, and an ever-increasing share of retail sales are taking place online,” said Richard Barkham, CBRE’s global chief economist. “That is prompting traditional retailers, e-commerce companies and third-party logistics firms to seek out advanced ‘prime’ logistics warehouses to modernize their supply chains and thus facilitate the rapid delivery of goods.”
Overall, growth in prime logistics rents in the Americas last year (up 5.6 percent) outpaced that in Asia (up 2.5 percent) and in Europe, the Middle East and Africa (up 0.8 percent). Prime rents are the highest achievable rents for a logistics facility of the highest quality and specification.
“E-commerce demand is acute in the Americas, and rent in the U.S. is growing from a relatively low base given the abundance of developable land here,” said David Egan, CBRE’s head of industrial and logistics research in the Americas. “Developers are building and delivering more logistics buildings, but that new supply can’t keep up with demand. Therefore, industrial occupiers should expect to see rents rising for a while longer.”
Still, American logistics markets have a lot of ground to make up before they rank among the world’s most expensive. That distinction goes to densely populated markets with higher land costs. Last year’s most expensive markets are led by Hong Kong with an annual prime rent of US$28.94 per sq. ft. per annum, Tokyo ($16.74), London ($16.36), Singapore ($10.91) and Stockholm ($9.90). The most expensive market in the Americas was Los Angeles-Orange County, ranked 12th globally at US$8.04 per sq. ft. per annum.
CBRE tracks prime rents in 68 logistics hubs around the world. Fifty-nine percent (40 markets) of tracked markets saw year-over-year increases in rents, 25 percent (17 markets) saw no change and only 16 percent (11 markets) saw decreases. To focus this report solely on prime facilities, CBRE limited its scope to buildings larger than 100,000 sq. ft. (10,000 sq. m.), with ceiling heights greater than 26 to 36 feet (eight to 10 meters) and a loading-dock ratio of one dock to 10,000 sq. ft., among other criteria.
GLOBAL PRIME LOGISTICS RENTS
TOP 10 GLOBAL LOGISTICS HUBS BY PRIME RENT GROWTH
Note: All data is as of Q4 2015. To download the full report, click here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.