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10/25/22
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This report provided by CBRE
The advanced age of U.S. warehouses – 43 years on average – is continuing to spur record construction activity as big e-commerce and retail distributors demand larger, more modern facilities, according to a new report from CBRE. Construction activity in 2022, as of the end of the second quarter, has already totaled a record 627 msf.
California’s Inland Empire stands out in the analysis as having the youngest average warehouse age among the nation’s top 15 warehouse markets. The average warehouse age in the Inland Empire is just 28 years, compared to 47 years in Los Angeles.
“The Inland Empire industrial market has rapidly developed over the last 35 years due to the availability of approximately 30,000 + acres of industrially zoned land near the Ports of Los Angeles and Long Beach. Demand for industrial space close to these ports has exploded with the outsourcing of manufacturing in Asia,” said Dan de la Paz, Executive Vice President with CBRE, based in the Inland Empire.
Markets with the youngest average warehouse age tend to be those with relatively available, affordable land and within an ideal distribution radius of large population centers.
Market -- Average Warehouse Age -- Warehouse Inventory*
Inland Empire -- 28 year -- 561 msf
Phoenix -- 33 -- 251.2 msf
Indianapolis -- 34 -- 217.8 msf
PA I78/I81 Corridor -- 36 -- 396.3 msf
Houston -- 37 -- 427.4 msf
Atlanta -- 37 -- 611.6 msf
Dallas/Fort Worth 41 688.8
Columbus -- 43 -- 207.1 msf
Chicago -- 44 -- 749.5 msf
Los Angeles -- 47 -- 470.2 msf
*In millions of sq. ft.
A quarter of existing warehouse space is aged more than 50 years and most of that product tends to have a smaller footprint and lack the features, design and amenities required by modern distributors. In contrast, newer warehouses tend to measure larger than 200k sf (often into the seven-digit sizes) and feature high ceiling heights, air conditioning, huge floorplans and cross-dock layouts to allow for fast unloading and reloading.
Robust construction over the past decade has expanded overall U.S. warehouse square footage by 18.6%, mostly due to the need for larger facilities.
“The warehouse sector has undergone more modernization than many other asset classes in commercial real estate over the past 10 to 20 years,” said John Morris, CBRE’s Americas President of Industrial & Logistics. “The market can support more of these bigger, better buildings as well as most of the older facilities. Those that become truly obsolete can and likely will be redeveloped into other uses.”
That’s not to say older buildings are not in demand. Rather, warehouses older than 40 years are more than 95% occupied on average. Many of those older facilities are in urban, infill locations that are ideal for distribution to large, densely packed populations.
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