26 MHLNEWS.COM I SUMMER 2021
of Hackett Associates, which measures port activity for NRF
on a monthly basis. “We saw the busiest February on record as
the ports worked to clear the backlog, and the number of ships
at anchor in San Pedro Bay waiting to dock at Los Angeles and
Long Beach is dropping.”
The growth in retail sales also drove demand for warehouse
space located near ports, according to the industrial real estate
services firm CBRE. As major port cities came under additional
strain, demand grew for additional warehouse space in markets
with already scant availability.
Long Beach and Los Angeles have seen the biggest surge,with year-to-date loaded imports increasing 32.1% and 24.2%,respectively. On the East Coast, increases were experiencedby Savannah ( 17.7%), Port of Virginia ( 16.8%) and the Portof New York and New Jersey ( 13.2%).
This increased demand for warehouse space in port areas
pushed down the average vacancy rate to 3.6% at the end of
2020, one percentage point lower than the national average.
Low availability may persist for some time. Only 75 million
sq. ft. are under construction in these markets, with more than a
third preleased. All of this equates to rental rates hitting record
highs, CBRE says.
Retailers and manufacturers learned to build up a healthysafety stock to limit supply chain disruptions, according to
John Morris, leader of CBRE’sAmericas Industrial & Logisticsbusiness. “While this will helpprotect consumers, it has put astrain on seaport industrial markets, as they need more supply tomeet this surging demand. Without more construction, we willsee rental rates continue to soar.”
Distribution firms want to beclose to major air hubs to expedite speedy deliveries, but thereoften is a premium price to pay.According to a separate reportfrom CBRE, industrial rent premiums average 13% in the topU.S. airport submarkets andreach as high as 47% in the No.1 submarket of Chicago O’Hare.
In this era when customerstake next-day delivery for granted, it should not be surprising thatthird-party logistics firms, e-commerce companies and retailersare all vying for industrial spacewith proximity to major airports.These companies appear willingto pay a premium for this covetedbut limited supply real estate tomeet customer needs for rapidorder fulfillment. The top airportsubmarkets by cargo volume garner rents above the local marketaverage.
Third-party logistics providers (3PLs) are the main driversof this activity, accounting for29.6% of activity in major airportsubmarkets, followed by general retail and wholesale ( 24.4%)and pure-play e-commerce-onlycompanies (16%). Others includefood and beverage at 12.9%;manufacturing; 5.9%; automobiles, tires and parts, 4.8%; medical, 4%; and building materialsand construction, 2.9%. MH&L
Contributing editor DavidSparkman is founding editorof ACWI Advance ( www.acwi.org).
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