Where the Priciest US Warehouse Markets Are

 The San Francisco Peninsula is the most expensive market in the US for warehouse rents and the third most expensive region globally, followed by the nearby North Bay and Washington’s Puget Sound.

Average rents for warehouse space in the San Francisco Peninsula clock in at $18.25 per square foot, followed by rates of $14.62 per square foot in the North Bay and $14.31 in the Puget Sound – Eastside submarket, according to a new global logistics report from Cushman & Wakefield.

On the flip side, Memphis ranks as the cheapest US market and seventh least expensive market in the world, with rates at $3.61 per square foot. Columbus follows behind as the second cheapest US market and the tenth least expensive region globally with average rents of $3.95 per square foot.

Cushman experts note in the report that despite tight market conditions and pummeling demand for logistics space, industrial rents are usually slow to rise. Last year, less than half of the 250 markets the firm tracks globally reported positive rental growth.  And while some of that data can be explained by landlords opting to hold off on rental increases, the numbers are similar even when looking back five years.

But in key markets where land is scarce and supply is challenging, that could change.

“Growing investor interest in industrial assets has compressed average yields in recent years, while office yields have held comparatively steady,” the report notes. The upshot of this is that for many markets in the US, prime industrial yields are now tighter than for equivalent office towers.”

Philadelphia and New York City illustrate this trend; spreads are -175 bps and -100 bps respectively, according to Cushman.

“The narrowing spread between industrial and office assets confirms what landlords are experiencing in many key markets across the globe—increasing costs across many metrics associated with higher land prices,” the report notes. “Scarcity of land is so severe in some markets that pent-up demand has been cited as a consequence. Higher land values become even more pressing when additional factors such as land tax, water rates and other infrastructure charges are also increasing.”

When land values reach a breaking point in those markets, it’s more likely that cost increases will be passed on to tenants through higher rents, Cushman experts say.

Analysis earlier this year from Moody’s Analytics predicts that as vacancy declines, effective rents will rise by 1.4% in 2022.

https://www.globest.com/2021/05/20/where-the-priciest-us-warehouse-markets-are/