Blog postsApril 04, 2016
4 Biggest Numbers in Warehousing
In this weeks episode of Logistics 2.0 we discuss the 4 biggest numbers in warehousing, from vacancy rates to new construction build rates these numbers impact all of us in supply chain & logistics. Watch the video here, or read the transcript below.
Over the past several quarters, you may have noticed some significant changes in the industrial real estate market. We have the numbers that explain why today on Logistics 2.0.
Welcome to Logistics 2.0. I'm Karl Siebrecht with FLEXE. This week, we're introducing another new segment that we call By the Numbers. In it, we're gonna summarize some key statistics from the logistics industry that we feel are illustrative of major trends happening in the market today. This week we're gonna talk about warehousing in the United States. Specifically, we're gonna talk about warehouse utilization, pricing, and build rates.
19. We have now seen 19 consecutive quarters of declining warehouse vacancies in the U. S. Many of you are probably feeling this, day in and day out. The implication, of course, is very clear. There's just less space to find when and where we need it.
6.4%. The current vacancy rate for warehousing in the U. S. is 6.4%, a very low number but actually historically low. It is 60 basis points lower than it was the end of last year, and a full 120 basis points lower than it was at its last historically low point at the end of 2008. And, of course, that was just before that little thing we started to call the Great Recession started. Again, this is probably confirming what many of you all are already feeling out there. Space is scarce.
6X. So what do we do when we run out of capacity? We build more. Over the past four years, the annual construction rate of new big-box warehouses has increased sixfold, to 61 million new square feet of capacity coming online this year and an additional 74 million of new capacity next year.
28%. So what happens when there's little space available during the time period when new construction is trying to catch up? Rents go up. In fact, between 2011 and 2015, warehouse rates are up a whopping 28%.
So what does this all mean? First, the macro numbers clearly support what we're seeing day in and day out. It's getting harder and harder to find incremental warehousing space, when and where we need it. And it's getting much more expensive to secure it when we can find it.
Second, it's a great reminder of the magnitude of cyclicality in the industrial real estate market today. It wasn't that long ago that there was actually a glut of warehousing capacity driven by the Great Recession that started in 2008. And now, all of a sudden, it seems we're scrambling to keep up, and we've reached historic lows in capacity available. As all this new capacity is coming online, 61 million square feet this year, 74 million square feet next year, you can't help but wonder if there might be a potential economic slowdown around the corner this year, maybe next year. And these two factors will merge to create yet another glut.
Fundamentally, this is driven by the confluence of two issues at once. Number one, the fact that it is inherently difficult to forecast, and number two that this capacity comes in very, very large chunks. And there's a long lead time to bring that capacity online.
This has been a look at the industrial real estate market in the U. S. By the Numbers. If you like this content, please share it, subscribe to our channel, sign up to our email, and please comment below. That's it for this week. I'm Karl Siebrecht for FLEXE, and this is Logistics 2.0.