Although empty store shelves and more than 100 cargo ships idling off the coast of California were attributed to supply chains disruptions, one of the less publicized issues involved a national warehouse shortage. While the logjam at the Port of Los Angeles and Port of Long Beach made splashy headlines, Southern California warehouse facilities were reportedly at or near full capacity. The storage space shortage is a persistent national crisis.
During the peak of the supply chain bottlenecks, media outlets such as the New York Times and Wall Street Journal investigated the underlying causes. They stumbled across the fact warehouse vacancy rates plummeted to a 3.2 percent national average. The NY Times interviewed Greg Sanguinetti, president of Pro Group Logistics in Sparks, Nevada. He indicated that companies were gobbling up warehouse space. Some outfits were securing leases of 50 percent more than they needed to plan for future shortfalls.
As the saying goes, every crisis creates an opportunity, and Mr. Sanguinetti’s company reportedly expanded its leasable space from a single, 40,000 square foot warehouse to four facilities upwards of 300,000 square feet each.
The Wall Street Journal published articles such as Tighter Warehouse Space Adds to the Supply-Chain Squeeze in October 2021, and “Inflation Pressure Hits New Warehouse Leases” in December. Although crisis-themed, the findings provide a veritable investor's roadmap for lucrative next steps.
“The third-quarter demand for industrial real estate exceeded supply by 41 million square feet, pushing the vacancy rate to 3.6 percent, down from 4.3 percent in the same quarter of 2020 and the lowest level in data going back to 2002, according to new figures released by real-estate firm CBRE Group Inc,” the Wall Street Journal reported.
The articles also highlighted that national third-quarter vacancy dipped to 3.6 percent before ending the year at 3.2 percent. The rising number of imports, coupled with increased consumer activity, has created a wealth-gaining opportunity for investors to quickly erect metal warehouse facilities. Year-over-year lease rates are skyrocketing, making the industry one of the more profitable.
“The rate increases, which CBRE compared with long-term contracts up for renewal during the third quarter of this year, have been stronger in the high-demand regions,” the Wall Street Journal reports. “Rents to replace leases expiring this year in central New Jersey, Philadelphia and the Inland Empire near the ports of Los Angeles and Long Beach were more than 60 percent higher than rates for leases that started in 2016.”
According to supply chain experts, the U.S. will need more than 330 million square feet of additional dedicated warehouse space for online fulfillment orders alone over the next three years. E-commerce is expected to spike by 26 percent or more by 2025. Savvy investors and developers would be hard-pressed to find a better opportunity than constructing cost-effective meal warehouse buildings.
If you are considering filling the country’s need for millions of square feet of warehouse space, the experienced professionals at Dutton & Garfield provide state-of-the-art metal building designs and construction for New England businesses. Contact us for a consultation today