Growth of E-Commerce Industry Could Change Market for Suburban Warehouses

BOSTON—With more and more consumers purchasing goods online, companies need more sites to easily supply their customers in urban markets. This trend poses many benefits for the market of suburban warehouses. Many firms demand state-of-the-art warehouses and structures, leading to the demolition of older complexes. Rental rates appear to increase as the supply of these newer and more functional spaces continues to grow. While warehouse absorption remains positive for the quarter, industrial absorption became negative and its rent continues to soar. The latest report from Perry Research details the latest stats for the warehouse and industrial markets while providing reasons for the recent trends…

Warehouses

Vacancy decreased 0.4 percent to 7.3 percent on 263,000 sf of positive absorption. Simultaneously, average asking lease rates stabilized, edging up $0.01 to $6.37 per sf. Absorption has been positive for all but three of the last 20 quarters during which tenants have increased occupancy levels by 5.9 million sf. Persistent demand has lowered vacancy in the Boroughs and Devens submarkets to 1.8 percent and 0.6 percent, respectively.

Even ceiling heights play a role in absorption rates. Properties with ceiling heights above 30 feet are 4.8 percent vacant and have seen 915,000 sf of positive absorption in the last twelve months. However, lower-ceiling properties are 8.2 percent vacant and have seen negative absorption of 501,000 sf over the same period. Despite tenant preference for state-of-the-art facilities, only one property of 160,000 sf remains under construction market-wide.

Numerous companies signed warehouse leases in the area during this quarter. Mancon took occupancy of 88,000 sf in Stoughton in connection with an MBTA contract. Simultaneously, The Paper Store leased 86,000 sf in Ayer, Sonepar took 78,000 sf in Brockton, the United Parcel Service took occupancy of 76,000 sf in Wilmington and Consumer Auto Parts moved into 65,000 sf in Milford. Meanwhile, DHL left 72,000 sf in Franklin as part of a consolidation. With more companies entering lease agreements than leaving them, it becomes more evident that a 6.1 million sf Streetcar Ring, already 4.4 percent vacant, could see increased demand as online retailers move to facilitate urban strategies. MORE HERE

Industrial

Absorption of negative 101,000 sf increased vacancy 0.2 percent to 6.6 percent as average asking lease rates jumped $0.24 to $7.79 per sf. Interestingly, this is only the second time in the last 16 quarters that absorption has turned negative. Simultaneously, asking rents are 3.4 percent above year-ago levels, an increase driven by strong demand for Class A facilities, where vacancy is 3.3 percent.

Despite the negative absorption levels, some key lease agreements took place this quarter. Waters Corporation moved into 56,000 sf in Franklin as Fresenius Kabi took occupancy of 48,000 sf in Canton and Bald Hill Builders took occupancy of 13,000 sf in a move from Sharon to Walpole. Meanwhile, Christian Book Distributors pulled out of 56,000 sf in Peabody in a consolidation.Simultaneously, a few key acquisitions took place this quarter. Jumbo Capital Management bought a three-blding portfolio at 1400 Providence Highway in Norwood ($14 million, 156,000 sf, $90 per sf) as

Overall, the transformations in the warehouse and industrial markets reflect the changing times as online retail companies seek more state-of-the-art warehouses to reach their consumers in an easier way. Check out the full Perry Node Report HERE.