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1/18/18
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The e-commerce-fueled surge in development of warehouses and distribution centers has generated double-digit, year-over-year percentage increases in prices for industrial land in major markets, led by California’s Inland Empire, according to a new report from CBRE. CBRE found that the average price for large industrial parcels of 50 to 100 acres – usually earmarked for construction of large, regional warehouses – increased to more than $100k per acre from roughly $50k a year ago. In California’s Inland Empire, prices per acre soared a record 35% to $980k per acre.
“Land prices will continue to escalate in this region due to the significant demand from both users and developers to acquire land for build-to-suit and speculative developments,” said Kurt Strasmann, executive managing director of CBRE’s Orange County and Inland Empire operations and Southern California functional industrial & logistics market leader. “We see this trend continuing well into 2018 and into 2019. This movement has been in place for the last six or seven years, which coincides with the national economic recovery. We expect similar escalations for the next 24 months across the major markets.”
Similarly, industrial plots of five to 10 acres – often suited for construction of smaller, infill distribution centers in urban or suburban settings – increased to more than $250k per acre this year from roughly $200k a year ago.
“Escalating land prices are a big reason why new supply of U.S. warehouses and distribution centers hasn’t kept pace with strong demand in recent years,” said David Egan, CBRE Global Head of Industrial & Logistics Research. “This situation won’t go away any time soon, because the markets where distribution centers are most in demand – typically near or in densely populated city centers – have scant available land for industrial uses.”
CBRE found double-digit percentage increases in land prices in major industrial markets, including Northern New Jersey (up 17% to nearly $1.8 mil), Las Vegas (up 17% to $220k), Chicago (up 16% to $250k), Atlanta (up 14% to $100k) and Houston (up 14% to $196k). In many cases, the markets that registered substantial gains in land prices also saw increases in average asking rents.
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