Warehouse demand is high and it doesn’t look like it will be slowing down any time soon. But what are the reasons behind this? Is it because of the growth of e-commerce? The need for more distribution space? Or something else?
Let’s take a closer look at the market to see where the opportunities lie.
Expert Insight
Senior director at CBRE, James Breeze, talked about why warehouse demand is expected to increase due to onshoring, and how the Middle America market can benefit from it.
James Breeze, senior director and the global head of industrial and logistics research at CBRE, expects the onshore manufacturing push to advance the booming warehouse sector.
Even though some sectors such as office construction and hospitality have seen double digit declines since the beginning of the pandemic, manufacturing buildings grew by 21.6%, U.S Census Bureau Data reports.
We also spoke to investors to get their input. National warehouse buyer Alex Capozzolo of Brotherly Love Real Estate stated, “We’re seeing more competition among warehouse buyers recently. Different real estate investors are graduating from residential and commercial into industrial. Having one large roof with a high-paying tenant vs a bunch of rental properties is drawing more investors in. We are currently transitioning most of our smaller assets into larger warehouse buildings because the demand from tenants is very strong.”
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How Does This Affect Demand In The Warehouse Sector?
It’s actually very simple…
Onshoring increases demand for warehousing.
Companies need to increase their warehouse space to distribute all products as close as possible to production point, or major transportation channels near the production, explains Mr Breeze. This situation is a net benefit to warehousing, specifically in those markets where manufacturing demand is on the rise.
This is going to have a major impact on how the goods flow.
When domestic manufacturing increases, it also affects interstate transportation, in some cases even the use of rail or air. Meaning – this will have a positive impact on the markets.
What Led To This?
The warehouse industry has seen unprecedented growth in recent years, but the pandemic is facing headwinds that could threaten its stability.
A dearth of space for manufacturing businesses and soaring e-commerce demand have helped make it one of America’s fastest growing industries as consumers continue to spend money at record levels despite high inflation rates, which present challenges related specifically with this type or business model.
… And Now The Warehouse Demand is at Record Level
Quite simply, the warehouse industry is booming. The e-commerce market, with its ever increasing need for one and two day shipping has created a demanding climate that can’t be matched by any other time in recent history.
And warehouses are expected to see even more growth in the next few years. A recent survey by JLL, a real estate services firm based out of New York City, found that out of 720 surveyed logisticians, 74% of participants predicted 5% or more annual increases over the next three years. Around 28% of them also stated that there would be a 20% increase (or more), and 71% expected demand from e-commerce to increase significantly by 2024.
With rising raw material costs and global inflationary pressures, demand from consumers has led to a rapid V-shaped recovery with double digit growth in the warehousing sector. Experts say that by year end this will reach all time highs.
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