TOP 10 MARKETS – WAREHOUSE OVERALL VACANCY
- Overall vacancy in the top ten industrial markets shows an interesting fact. As of April 2013, overall vacancy in warehouse/distribution buildings with clear heights below 22’ is 7.7%, compared to clear heights between 22’ and 29’ (10.1%) and clear heights 30’ and greater (10.1%). The top ten markets include Atlanta, Chicago, Dallas/Fort Worth, Greater Los Angeles, Houston, Inland Empire, Central and Northern New Jersey, Orange County and Philadelphia.
- Starting in the late 1980’s and into the 1990’s, tenants started demanding clear heights greater than 22’ clear. During the late 1990’s and 2000’s as new technology allowed users to stack products higher (30’ clear and greater), saving on space requirements, developers fulfilled tenants needs. From 1996-2008, over 1.1 billion sf of spec product was added to the market.
- However, as this change occurred, start-up companies and smaller tenants remained in their space longer, keeping vacancy of the less than 22’ clear buildings low. In addition, the share of the market for lower clear height buildings is shrinking while the big box warehouse share is growing. The slowdown in demand coupled with the addition of 151 msf of spec product to the market in 2008-2009 drove the U.S. overall vacancy to 10.9% in 2009.
- When the market finally started recovering in 2011, there was a shift in demand dynamics due to the significant growth of e-commerce. Companies focused their investments in fulfillment – maximizing efficiencies in inventory, service time and delivery – and set up massive distribution centers. Most of these mega fulfillment centers were built on a BTS basis.
- Due to the increasing amount of BTS activity, the market has not had time to absorb the amount of speculative construction that was delivered vacant which accounts for the higher vacancy. Currently, there are ten 1-msf plus projects under construction and nine of them are BTS.
Source: Cushman & Wakefield Research. Only markets tracked by Cushman & Wakefield offices are included in this analysis.