Industrial space faces squeeze with record-high rents and historic vacancy lows, according to JLL research
The billion-dollar question: can new construction keep up with demand for industrial real estate? Healthy consumer spending and buoyant e-commerce sales are driving demand for warehouse and distribution space, pushing vacancy rates to a 17-year low and rents through the roof. But demand is outweighing supply and new construction is struggling to keep up.
In St. Louis, the industrial market continues to roll along after a record setting 2016. Developers continued to move ahead with new construction as 2.3 million square feet of new buildings broke ground in the first quarter. The focus of development remains along I-70, with 81.5 percent of new buildings under construction located in North County and St. Charles. Following new development and low vacancy rates, warehouse rents are ticking up, increasing 5.8 percent from last year.
Another five million square feet of warehouse space is expected to complete
this year; almost three million of that is speculative. This will bring more
options to the market for tenants, particularly those looking in North County,
St. Charles, and the Metro East.
With few properties available to buy or lease, the industrial construction pipeline in the U.S. is growing and being led by a significant increase in build-to-suit properties, according to JLL research. Adding the new deliveries from the past five years with the current construction pipeline, the U.S. industrial market will add nearly one billion square feet to its inventory by 2018.
Read more in JLL’s recently released Industrial Outlook 2017.