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The demand for warehouse space is at record levels. Retailers are on the hunt for more warehouses to help meet their growing e-commerce needs and fulfill online orders at quicker speeds, according to a new report from JLL, a commercial real estate services firm.
Big box retailers like Walmart, Target, Big Lots, TJX, and Costco are aggressively competing for more warehouse space, trying to catch up to Amazon who has long been buying up warehouses across the country, JLL notes.
“We’ve been on a long-term journey of shifting consumer behavior from buying in stores to online,” Craig Meyer, president of JLL Industrial for the Americas, told CNBC. “That’s the existential driver for demand in the U.S.”
Warehouse demand is notably surging in places like Columbus, Ohio. Industrial real estate demand in Columbus is expected to jump 61% in 2021 compared to 2020, according to JLL. The firm notes that Columbus is an attractive market to retailers because nearly half of the nation’s population is within a one-day drive.
The demand for more warehouses is also reaching record levels in Savannah, Ga., where demand has increased by nearly 10 million square feet over the past year, JLL’s report notes.
As demand surges, rents are rising fast. Industrial taking rents surged nearly 10% in the first five months of 2021 compared to the same period a year earlier, according to CBRE data.
“Momentum in the marketplace is really strong, and this is against a backdrop where there’s very high scarcity in our business,” Chris Caton, head of Prologis, one of the largest firms of logistics real estate, told CNBC. “Vacancy rates in the U.S. are four-and-half percent, basically 40-year lows. There has never been less available to lease, at a time when customers really, really need it.”