Warehouse Construction Remains on the Rise in the US

With the boom in e-commerce, the entire supply chain in the US is getting reshaped, with businesses changing the way they store goods and set up their logistics space.

Past decades had warehouses in the outskirts of the cities, away from the population. This was so goods could be moved a lot more easily with minimal hindrances. Now, companies want them closer to population centers so they could facilitate next-day and same-day shipping.

Along with the rise in retail shopping, this has led to a boom in warehouse construction. Data from a recent CBRE report states that the trend had hit a new high in the first quarter of 2017 and is expecting more growth in the near future.

Multi-story warehouses are also joining the fray in order to maximize space. Prologis Inc, the biggest provider of logistics real estate in the country, is even set to complete the very first multi-story warehouse in the US this year.

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A 2018 market outlook report by the CBRE head of research for the Americas believes that the added capacity will be a “welcome change in key markets such as Oakland, Orange County, and Los Angeles where vacancy rates are below 2 percent and last-mile deliveries are trying to reach massive urban populations”.

Land Prices Are Going Through the Roof

Due to the crunch on warehousing space everywhere, industrial land prices are skyrocketing. In Houston, the average price per parcel has gone up to $196,000 per acre, which is a 14-percent increase from only a year ago.

Nationally, the average price for tracts of 50 to 100 acres went up to over $100,000 per acre—about double from what they were last year. Meanwhile, plots of 5 to 10 acres have increased to more than $250,000 per acre and are $50,000 more from how they were worth a year ago.

Inland Empire in Southern California has the biggest land price increase with the average jumping 35 percent year over year to a very hefty $980,000 per acre. Other markets with rising industrial land prices include Atlanta, Las Vegas, New Jersey, and Chicago.

David Egan of CBRE said in a statement that the situation isn’t going to go away anytime soon as the markets where distribution centers are most in demand have scant land for industrial use.

Many industrial developers are having a hard time finding suitable and affordable land for new distribution centers and warehouses, mainly due to escalating prices. Even so, businesses are refusing to miss out on the trend.

E-commerce giant Amazon is one big user that is definitely on the move. They have leased over 1 million square feet in St. Louis, plus they are building a similarly-sized fulfillment center in Houston. FedEx Ground, Liberty Property Trust, Oakmont Industrial Group, TriStar, Kadean Construction, and other companies are following suit.

Mixed Reactions from the People

Plenty of locations are getting their fair share of large buildings and industrial developments. Many of these are set to benefit the people around them. For instance, the huge warehouse project at Port of Tucson is projected to add over 1,500 jobs. But not everyone is excited over the trend.

The Lehigh Township in Pennsylvania, for example, recently adopted an ordinance removing warehouses as a by-right use in general commercial zoning districts. However, they are allowed within their industrial zones by conditional use. This change came to be so the township could put some control on warehouse growth in the area.

Meanwhile, over 100 residents in the Palmer Township voiced out concerns regarding a proposed warehouse and distribution center to be built in their backyards. Their main concerns revolved around associated construction completion issues such as public utilities installations, widened area roads, border shoulders, traffic impacts, flooding, and diesel emissions.

They had their first hearing in January 30 and had another meeting scheduled in March. Prior to the hearing, the developer decided to scratch their plan though to avoid a lengthy legal battle. So, now, the residents have switched their focus on yet another warehouse proposed at 1492 Van Buren Road.

It is safe to assume that many more neighborhoods are expected to speak up regarding warehouse constructions in their area but there is no denying that there’s nothing but growth seen for this trend.

 

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