Global Prime Logistics Rents are Increasing, Fueled by E-Commerce Demand.

 

The most costly markets are Hong Kong, Tokyo, and London.

According to CBRE Group Inc.'s inaugural Global Prime Logistics Rents study, global demand for e-commerce fulfillment centers and distribution centers fuelled a 2.8 percent year-over-year increase in prime logistics rents, with double-digit percentage gains in U.S. coastal regions leading the way. Six of the top ten markets in the world with the fastest-growing prime logistics rents were in the United States, with Oakland, Calif., leading the way with a roughly 30 percent increase. qatar properties

Although American seaports and inland ports aren't among the most expensive in the world for logistics rentals, they did saw the biggest growth in 2015, thanks to an increase in the movement of goods into and across the region from online sales. In addition to Oakland, which ranks first, New Jersey is second, the Inland Empire is third, Los Angeles-Orange County is seventh, Dallas-Fort Worth is eighth, and Atlanta is ninth.

Two more cities in the Americas are in the top ten for rent increases: Santiago, Chile, and Ciudad Juárez, Mexico.

The significant rise in prime rentals in the Americas was mostly attributable to tremendous expansion in coastal cities in the United States, where relentless occupier demand drove up pricing. Despite the high cost, the desire for quality premises is the most important factor for inner-bay logistics users in Oakland. In other places, such as the Inland Empire, new development is asking premium rates. In Latin America, Santiago and Ciudad Juarez had 10.9 percent and 10.2 percent rises in prime rent, respectively. Prime rents in So Paulo were down 10.5 percent year over year.

A supply chain arms race among retailers, shippers, and suppliers attempting to accommodate the continuous rise of e-commerce is fueling most of the upward pressure on rents in logistics markets in the Americas and around the world. Modern distribution and fulfillment centers with high loading dock ratios and clear ceiling heights of at least 26 feet to allow high-tech stacking racks and automated storage and retrieval systems are in high demand. Many of these facilities are being built in densely populated areas with high land costs.

"Global consumer demand remains solid, and an ever-increasing share of retail purchases is taking place online," CBRE's global head economist, Richard Barkham, said. "As a result, traditional retailers, e-commerce enterprises, and third-party logistics providers are looking for advanced 'prime' logistics facilities to modernize their supply chains and make goods delivery more efficient."

Last year, increase in prime logistics rents in the Americas (up 5.6%) surpassed that in Asia (up 2.5%) and Europe, the Middle East, and Africa (up 2.5%). (up 0.8 percent). The highest possible rents for a logistics facility of the greatest quality and specification are known as prime rents.

"E-commerce demand is strong in the Americas, and rents are rising from a low base in the United States because to the amount of developable land," said David Egan, CBRE's head of industrial and logistics research in the Americas. "Developers are constructing and delivering more logistics facilities, but demand is outpacing supply. As a result, industrial tenants should expect rents to rise for a bit longer."

Still, American logistics markets have a long way to go before they can be considered among the most expensive in the world. This distinction is given to marketplaces that are highly inhabited and have higher land costs. Hong Kong, with an annual prime rent of US$28.94 per sq. ft., is the most costly market, followed by Tokyo ($16.74), London ($16.36), Singapore ($10.91), and Stockholm ($9.90). Los Angeles-Orange County, which placed 12th internationally at US$8.04 per sq. ft. per year, was the most costly market in the Americas.

CBRE monitors premium rentals in 68 global logistics centers. Rents increased in 59% (40 markets) of tracked markets year over year, were unchanged in 25% (17 markets), and decreased in only 16% (11 markets). CBRE confined its coverage to buildings larger than 100,000 sq. ft. (10,000 sq. m.), with ceiling heights greater than 26 to 36 feet (eight to ten meters), and a loading-dock ratio of one dock to 10,000 sq. ft., among other criteria, in order to focus this report entirely on top facilities.

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