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Warehouse Boom: 3 Million SF Broke Ground in Fourth Quarter, CBRE Reports: Land at $196,000 Per Acre

Tom Lynch

HOUSTON – (Realty News Report) – Warehouses totaling more than 3.3 million SF broke ground in Houston in the fourth quarter of 2017, accentuating a trend for higher industrial land prices, according to CBRE.

Many of the new industrial buildings are being constructed on a spec basis, CBRE said, although Hines and Arch-Con Construction are building 600,000 SF for Emser Tile in Pinto Business Park.

Record-setting container ship activity at the Port of Houston along with major plastic pellet production and emergence of e-commerce retail has driven the industrial market. Over 8 million SF of industrial space is currently under construction in the Houston area, CBRE said in its fourth quarter industrial report.

The demand has pushed up industrial land prices.

In Houston, CBRE found land prices rose to an average $196,000 per acre, a 14 percent increase from the previous year. “With the current tenant demand in the Houston area, pricing is expected to continue to increase in 2018” said Tom Lynch, a CBRE Senior Vice President, who has worked in the Houston industrial market for decades.

The surge in industrial land demand is not just a Houston phenomenon.

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, across the nation, CBRE reported.

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 $100,000 per acre from roughly $50,000 a year ago.

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 $250,000 per acre this year from roughly $200,000 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 also found double-digit percentage increases in land prices in other major industrial markets, including California’s Inland Empire (up 35 percent this year to $980,000 per acre), Northern New Jersey (up 17 percent to nearly $1.8 million), Las Vegas (up 17 percent to $220,000), Chicago (up 16 percent to $250,000), and Atlanta (up 14 percent to $100,000).

In many cases, the markets that registered substantial gains in land prices also saw increases in average asking rents.

Jan. 3, 2018 Realty News Report Copyright 2018

 

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