U.S. Warehouse Rental Rates Increase

Warehouse rental prices in the United States are skyrocketing as more and more businesses rely upon e-commerce to sell their goods. Real-estate brokerage firm CBRE Inc. reports that rental rates for warehouse space near import gateways and population centers jumped 9.9% in 2015 over the previous year.

The almost 10% increase in the U.S. greatly exceeds the average 2.8% increase in leasing rates that CBRE measured around the world. Two-thirds of the nine markets with the strongest growth in rentals were located in America, with Oakland, CA ranking as the fastest-growing market in the world. Growing 29.8% year-over-year, Oakland nearly doubles the rate of prices in the Northern New Jersey region, another hot U.S. market.

As online sales in the U.S. grow while sales at brick-and-mortar stores fall, CBRE says rental rates in the top markets will rise 6% in 2016. Online companies are increasingly adding warehouses and distribution centers to meet the demand for quicker fulfillment and wider product availability.

“Our California distribution center is the most expensive to rent,” says Lea Robinson, vice president of sales and marketing at Staton Corporate and Casual (asi/89380). “Dallas and Memphis have been reasonable given the years we’ve been in the locations and the relationship with the landlords. For us, good location is imperative. Although most of the suppliers ship free freight, we have a huge number of customers that like picking up their orders same day.”

Dan Kessler, director of operations at TSC Apparel (asi/90518), says that since signing the lease for the company’s warehouse in Fullerton, CA, in 2010, the rental rate has increased by almost 40%.

“We feel we need to be there because of the will call business,” Kessler says. “Small or mid-size companies will pick up orders themselves or send their own courier. It would be nice to move to Reno or an area that’s friendlier to employers and has cheaper lease rates, but then you lose that same-day business customer.”

Kessler says that it all depends on where you go. For example, the rental rate for the company’s Denver warehouse was higher than TSC Apparel had been used to. On the other hand, the rental rate for the Houston warehouse will decrease by 15% starting next year because the region’s oil issues have turned it into a “buyer’s market.”

CBRE also reported that markets in Asia and Europe remained the most expensive for industrial real estate, with Hong Kong leading the world with rental rates for prime space reaching $28.94 a square foot.