Where does the industrial market stop? Rents in hot markets are far beyond where they’ve ever been, and show no signs of slowing down. I guess fundamentally with vacancy and absorption, there’s not any clear writing on the wall. But there has to be a cap on rents somewhere? Underwriting 5%+ growth on rents that are well passed double digits can get kind of scary.
Are we in a bubble? What do you guys think?
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There is, like, no supply of warehousing. Plus, there are supply chain issues.
That’s what I meant by the fundamentals being there… but there has to be a cap on the rents for these 3PLs… they need margins
Rent is 5% of total cost to companies. Rents going up by 5% is like peanuts for them. That’s why densely populated warehouses are seeing more growth than middle America (Coastal vs Midwest). It’s also a function of land costs, LA infill is irreplaceable vs Dallas where everyone and their mother has land.
We’ve seen some “outdoor industrial” that’s slightly up the food chain from raw land. Used to store large equipment, cranes, trailers, etc. Could be converted to a warehouse, so expect that to add a little pressure to the market as well.
Aren’t these generally smaller lots in infill locations, and not big enough to develop a meaningful logistics asset?
To OP - I don’t anticipate local municipalities rushing to approve more industrial warehouses in neighborhoods.. NIMBYS and all that
Not the ones I’ve come across, may be smaller, but definitely not infill.
Only 5%? Boring
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