Research - JUNE 21, 2019

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Demand continues to outpace new warehouse construction

by Andrea Zander

Demand continues to outpace a four-year surge in warehouse development—much of it speculative—and allay any fears about overbuilding. There currently is more than 255 million square feet of warehouse space under construction, 70.2 percent of it on spec. Since 2015, however, warehouse demand has outpaced new warehouse completions by 169 million square feet and rents have increased by 19.2 percent, according to CBRE Econometric Advisors.

Five of the top 10 markets for speculative development have market conditions that justify adding more big-box warehouses: vacancy rates below or slightly above the national average (4.4 percent) and aggregate net asking rent growth of 7.8 percent annually.

The remaining five markets were well above the national vacancy average and their aggregate rent growth averaged 4.6 percent due to more available supply. With demand not likely to diminish, speculative big-box developments in those five markets are expected to lease up shortly af

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