The US warehousing market is set to grow in 2023, a turnaround from a pandemic-driven boom in demand for industrial real-estate, as companies slow decisions on new storage and distribution space amid fears of a recession.
Companies leased 132 million square feet of industrial space across the U.S. in the fourth quarter, down 28.2% from the third quarter, according to a new report from commercial real-estate services firm Cushman & Wakefield. it was second straight quarter-on-quarter decline in leasing.
“There’s a natural kind of cooling off right now, after the extreme boom we’ve seen over the past few years,” said Carolyn Salzer, Americas head of logistics and industrial research for Cushman & Wakefield.
Pullback Follows Several Years of Frantic Expansion in Warehousing build and lease Companies pushed as online shopping boom driven by Covid-19 pandemic snatch space to get stuff closer to the consumers. have been retailers pulling back on their inventory restocking However, since the middle of last year, more companies that were once scrambling for space are rethinking logistics expansion.
Amazon.Com ink
Doubled the size of its fulfillment network in 24 months as its business grew. But the e-commerce giant started last year reducing growth in its warehousing operations and started doing sublease some of its space Due to slow growth of e-commerce. Amazon said on Wednesday that it plans More than 18,000 employees laid offMostly in its corporate ranks, as it seeks to cut costs as online sales growth has retreated.
The warehousing market remained tight in the fourth quarter, even as the vacancy rate increased from 3.1% to 3.3%, reports Cushman & Wakefield. It was the second-straight quarter that vacancy increased After two years of tight availability, but vacancies are well below the 5% average vacancy rate in 2020.
For the full year, companies lease a total of 756.8 million square feet of industrial space in 2022, down 18% from the previous year.
Ms Salzer said the leasing slowdown portends a glut of new warehouse capacity in the coming months, with 682.6 million square feet of new development in the pipeline. Around 83% of the new space is being built without tenants, which is known as speculative projects in the real estate sector.
“It is a concern,” Ms. Salzer said, especially in markets in regions such as the western US and the Northeast, where leasing is slower than the national average.
Ms Salzer said developers are scaling back their plans for new projects as it becomes increasingly difficult to secure financing. As per the report, the amount of new space under construction was down by 4.3% as compared to the previous quarter.
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Appeared as ‘Warehouse leasing fails at year-end’ in the print edition of January 6, 2023.