By Mike Sunnucks | Rose Law Group Reporter
The growth of e-commerce, Amazon.com and ‘last-mile’ logistics networks has lifted demand for smaller warehouses.
A new report from commercial real estate firm CBRE finds an upswing in tenant demand for warehouses and light industrial space under 120,000 square feet. The trend is happening in Phoenix and nationally, according to CBRE.
CBRE researchers found nationally warehouses between 70,000 and 120,000 square feet have seen a 3.9 percent decline in available space and a 33.7 percent rise in rents over the past five years.
In metro Phoenix, warehouses between 70,000 and 120,000 square feet are outperforming large industrial parks the past five years. The smaller spaces have seen vacancy rates go from 9.0 percent down to 4.5 percent in the third quarter of 2019.
The vacancy rates for industrial and warehouse buildings above 120,000 square feet came in at 8.3 percent in the third quarter, according to CBRE.
The demand for smaller warehouse is driven in part by e-commerce firms led by Amazon.com creating extensive logistics networks including so-called ‘last-mile’ centers to speed deliveries to consumers.
With the rise of e-commerce and changing consumer expectations around delivery speeds comes the ever-growing need for users to store their inventory closer to their consumers,” said Jackie Orcutt, Senior Vice President with CBRE Industrial & Logistics. “Operating from several smaller buildings in various locations rather than from one large distribution center on one side of town allows these users to serve a greater population, faster. As a result, there is a larger pool of tenants looking for flexible, small- to mid-sized buildings.
Developers are trying to keep up with this demand of this product, but because it’s more costly to build due to the scarcity and higher cost of land in infill locations and less economies of scale than building a big box facility, demand will continue to outpace supply.”
