Big box industrial warehouses aren’t as sexy as office towers and multifamily buildings adding to city skylines, but that property sector is in the midst of a “golden era,” according to commercial real estate services firm CBRE.
Spencer Levy, CBRE’s head of research and senior economic advisor, Americas, touts the position of that property sector in the company’s 2018 capital markets outlook.
“Big-box warehouses are in their golden era, from tenant and capital demand perspectives,” Levy writes. “The good news is that all megatrends point to this continuing, but it has gotten to be very expensive to build or buy big-box. The better news is that the golden era of industrial is now expanding into smaller, last-mile facilities near high-density urban centers, and this opportunity is only now garnering institutional attention. Institutional-grade industrial real estate doesn’t have to be big-box anymore.”
Building new warehouse space in urban areas isn’t expected to get any cheaper. Zoning in dense residential areas has created a land -constrained market, particularly along Maryland’s Interstate 95 corridor. A report by Recode, using data provided by CBRE, found the cost of land to build large warehouses in the U.S. doubled from $50,000 an acre to $100,000 an acre in the last year.