US warehouse space is running out! Rents continue to rise

A MZ123 has learned that according to a new report from global industrial giant Prologis, despite Amazon's plans to cut new warehouse growth, strong demand for warehouse space, as well as supply chain delays, has caused available space in U.S. warehouses to drop to an all-time low.

At the current pace of supply and demand, available warehouse space in the U.S. could run out within 16 months, a historic low benchmark for inventory, according to a Prologis report.

Even as new warehouses are being built at a rapid pace, demand continues to tighten, with 375 million square feet of new warehouse space expected to come online in the U.S. this year, according to Prologis.

Additionally, competition for warehouse space and supply chain issues have accelerated rent increases, with Prologis finding that warehouse rents increased 8.5% between the fourth quarter of 2021 and the first quarter of 2022. Average U.S. rents in the first quarter were $7.62 per square foot, according to JLL.

Meanwhile, weaker-than-expected deliveries pushed warehouse vacancy rates down to a record low of 3.2%. The sluggish delivery pace prompted Prologis to raise its forecast for rent growth in 2022 to as much as 22%.

Consumer shopping habits are also driving warehouse demand. Last year, U.S. consumers spent $855 billion online. This year, that figure is expected to reach $100 billion for the first time.

In February, Amazon Chief Financial Officer Brian Olsavsky said on an earnings call that Amazon would taper growth in its physical warehouse investments in 2022. But Prologis researchers said that would have little impact on overall space demand this year.

Melinda McLaughlin, global head of research at Prologis, noted during the webinar that rapid structural changes in consumer habits and inventory patterns have created a huge demand for warehouse space that cannot be met from existing inventory due to low vacancy rates and supply chain delays.

Editor✎ Ashley/

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