Demand within the industrial market is expected to remain strong, according to a recent CBRE Industrial Occupier Survey. While demand may not reach the heights it did in 2021, 64 percent of the 100 U.S.-based survey respondents plan to expand their real estate footprint during the next three years despite economic uncertainty.
Meanwhile, 81 percent of Third-Party Logistics (3PL) companies expect to do the same. Food and beverage (75 percent) and building materials and construction (75 percent) companies also plan to increase their CRE footprints despite supply chain challenges, labor shortages and high occupancy costs, according to CBRE’s report.
“The U.S. industrial market is continuing to see robust demand, and companies are adding warehouse and distribution space to protect their inventories, diversify their supply chains and process growing e-commerce sales,” John Morris, CBRE President of Industrial & Logistics in the Americas, said in a statement. “Even with a more challenging economic backdrop, we’re still seeing that companies are interested in expanding their footprints in the short-term.”
Many companies will look to take a “bread-and-butter essentials” mentality when it comes to the kind of real estate they want to expand. When asked what matters most in selecting a new warehouse, 81 percent of tenants listed clear height as their top priority. The amount of loading bays/dock doors (76 percent) and power supply (56 percent) also ranked high on companies’ priority lists. Expansion capacity (43 percent) and column spacing (42 percent) will factor into businesses’ warehouse decision making as well.
For companies that look to expand, 66 percent of respondents plan to lease space on the open market, while 44 percent will look to partner with a developer to lease build-to-suit facilities. Thirty-seven percent of companies said they plan to buy land and self-develop their own facilities to address their expansion needs, while 31 percent plan to operate in customer-owned facilities.
Where tenants are looking for warehouse CRE space
More than one-third of respondents plan to expand in the southeast during the next 12 to 24 months, according to CBRE. This area has become desirable as it has several large logistics hubs that serve expanding population centers, large affordable workforces and seaport connectivity. Manufacturers also enjoy a supportive business climate in the region.
Meanwhile, growing industrial markets such as Atlanta, Nashville, Orlando and Charlotte are attracting tenants that need additional warehouse or manufacturing facilities. The southwest and Midwest regions also ranked high in desirability for warehouse CRE expansion. Reno, Phoenix and Minneapolis have become desired markets because of their strong demographics and infrastructure, which support industrial demand, per CBRE’s report.
Rent cost was cited as the top factor for respondents when it comes to selecting a market (74 percent). Lease options (50 percent), transportation (47 percent) and building design (45 percent) also ranked high for what companies consider when expanding their real estate footprint.