SAN FRANCISCO — At current rates of supply and demand, U.S. warehouse tenants could use up available inventory in 16 months, a record-low benchmark for inventory of warehouse space, according to Prologis, during a recent webinar.
“That may sound like a long time, but prior to 2021, that rate has never dipped below 32 months,” Prologis Head of U.S. Research Heather Belfor said. “This is by far the shortest time in history.”
Warehouse vacancy rates are at 3.2%, a record low, with rent expected to go up 22%, according to the company.
Prologis, a real estate investment trust that invests in warehouses, among other properties, was formed through the merger of AMB Property Corp. and ProLogis in June 2011, making Prologis one of the largest industrial real estate companies in the world.
According to the company, industrial rents grew 8.5% between Q4 2021 and Q1 2022. Construction deliveries for new building construction came in lower than expected, driving vacancy down to the historically low level.
Even with 375 million-square-feet of new distribution space expected to come online in the U.S. later this year, competition for space and supply chain issues have sped up rent increases, according to Prologis.
Consumer shopping habits also are fueling warehouse demand: For every percent shift in retail sales from stores to online, retailers need 50 million-square-feet of new distribution space, Belfor said. Last year, U.S. consumers spent $885 billion online, and this year it is expected to reach $1 trillion for the first time, according to software developer Adobe.
Prologis Global Head of Research Melinda McLaughlin said during the webinar, “The rapid pace of structural change in consumer habits and inventory patterns has led to pent-up demand for space that cannot be expressed in existing stock due to low vacancy or as easily in new developments due to supply chain delays that are keeping projects stuck in the construction pipeline.”
