Light industrial properties have outperformed other property types over the past five years, according to a new report from CBRE, Los Angeles.
Specifically, light industrial warehouses measuring 70,000-120,000 square feet registered the biggest decline in availability, down 3.9 percentage points, and the largest gain in average rents at 33.7%.
“In recent years, the headlines and attention have gone to the big-box distribution centers measuring 1 million square feet or more to serve multistate regions,” says Matthew Walaszek, associate director of industrial and logistics research. “But, smaller warehouses often positioned in densely populated markets are some of the most coveted properties for investors and users alike. These are the true last-touch warehouses from which merchandise is delivered directly to customers.”
A relative dearth of construction of light industrial facilities helps curtail availability and boost rents. Construction completions of light industrial warehouses smaller than 120,000 square feet have averaged 1% of the category’s overall stock since 1990, according to the study. In comparison, construction completions of warehouses larger than 250,000 square feet have averaged 3% of overall stock since 1990. The shortfall for light industrial properties results mostly from high land prices in dense markets as well as competition for space from other uses, like lofts and offices.
“We’ll continue to see strong demand for light industrial facilities as e-commerce grows, which in turn means we can expect to see additional strong rent growth for these warehouses,” says Chris Zubel, senior managing director leading representation of industrial and logistics investors in the Americas. “Light industrial is the hottest coal in the campfire.”