One World Supply Chain Consulting’s Post

The contraction in the U.S. warehousing sector is deepening: Construction activity and hiring in the business at the heart of logistics operations are pulling back sharply, as the industrial real-estate market gets further away from the frenzied expansion of the pandemic era. Cushman & Wakefield says industrial space under construction was down 43% from the previous year in the third quarter, the steepest decline since 2008, with the average vacancy rate climbing to 6.4%, the highest level since the end of 2014. The numbers illustrate how shifting consumer demand is cascading across the logistics business, slowing the demand for goods transport and storage. Federal hiring figures show warehouse operators shed a seasonally-adjusted 11,000 jobs in September. The storage and distribution sector has shed 171,600 jobs since May 2022. Source: WSJ

A contraction in the U.S. warehousing sector is deepening following a period of frenzied expansion during the pandemic. Real-estate developers sharply pulled back construction of warehouses in the latest quarter, and logistics operators slashed warehousing payrolls last month, signs that the market is resetting heading into the busy holiday shopping season. The amount of industrial real estate under construction in the third quarter fell to 309 million square feet, down 43% from the previous year and the steepest drop since 2008, according to real-estate services firm Cushman & Wakefield. Developers are paring back their expansion plans as companies have held off on making leasing decisions and higher interest rates have pushed up borrowing costs. “You have softer market conditions. It’s taking longer for some of these projects, when they deliver, to lease up,” said Jason Price, head of logistics and industrial research at Cushman. “There’s not this rush to get something built right away.” The vacancy rate for industrial real estate climbed to 6.4% in the third quarter, up from 4.6% in the same period a year earlier to the highest quarterly level since the end of 2014, according to Cushman. The receding demand is reaching across the sector. Warehouse operators shed a seasonally adjusted 11,000 jobs in September from August, according to preliminary Bureau of Labor Statistics data released Friday. Payrolls in the storage and distribution sector have fallen by 171,600 jobs from a pandemic-era high of 1.94 million jobs in May 2022. The Logistics Managers’ Index, a monthly survey of supply-chain managers, showed available warehouse capacity expanded in September but at a slower pace than August and below year-ago levels. The storage industry is contracting following a two-year stretch of feverish leasing, construction and expansion as e-commerce demand soared during the pandemic and companies sought to place their goods as close as possible to consumers to speed up delivery. Consumer demand for goods has since cooled off as Americans have shifted toward spending more on services and have grappled with higher inflation. Developers and owners of industrial real estate have also shifted their focus toward building data centers as demand soars for space to fuel a boom in artificial intelligence. Cushman’s Price said the declining construction could squeeze capacity if goods demand grows, triggering another turn in the cycle. “By next year, when another half of this current pipeline delivers, there’s not a lot behind it,” he said. “We should start having that inflection point at some point next year, and supply and demand come into more balance.”

The U.S. warehouse construction sector is facing a sharp decline, which could trigger a new cycle of rising square footage prices if demand for goods increases next year. In the third quarter of 2024, warehouse construction fell by 43%, the largest drop since 2008, as developers scaled back projects due to higher borrowing costs and delayed leasing decisions. Vacancy rates have risen to 6.4%, and payrolls in the storage and distribution sector contracted sharply. Despite the current slowdown, experts suggest that as the existing construction pipeline is completed, limited new supply could drive prices up if demand rebounds in the coming year. #retail #ecommerce #supplychain #logistics

2023 saw broken records for warehouse rents, up to $9.72 per square foot, with no signs of stopping. Vacancy is at an uncharacteristic low after a significant number of new construction finished last year, which has led to a staggered stabilization of demand. This brings an interesting perspective, with rent's rising and new construction being planned in warehousing, while the expansion of remote work has made some question the stability and future of traditional office buildings and their management. José Manuel Velarde CSCP, CPIM, CPSM, CPSD, Margaret A. Kidd, CMILT, CPE™Supply Chain & Logistics Technology - University of Houston #supplychain #warehousing #technology

Looking for industrial warehouse space? Negotiation is key! The nation's industrial market saw a slowdown in Q3, with the vacancy rate hitting 7.4%, a significant increase from the previous quarter. This marks the highest vacancy rate in a decade. Stay informed and negotiate wisely in this evolving market. #IndustrialRealEstate #Warehousing #CommercialRealEstate

📉 CBRE Says Warehouse Construction is on the Decline as Vacancy Rates Rise The U.S. warehousing sector is experiencing a significant contraction following a period of rapid expansion during the pandemic. Here are the key takeaways: 📉 Sharp Decline in Construction: Warehouse construction dropped to 309 million sq ft in Q3, a 43% decrease from last year—the largest decline since 2008 (Cushman & Wakefield). 🏗️ Developers Reassess Plans: Companies are delaying leasing decisions due to higher interest rates and a more cautious market. 📊 Rising Vacancy Rates: Industrial real estate vacancy climbed to 6.4% in Q3, up from 4.6% a year ago—marking the highest level since late 2014. 👷 Job Cuts in Warehousing: The sector saw a reduction of 11,000 jobs in September, with a total loss of 171,600 jobs from the peak in May 2022. 📦 Slowing Warehouse Capacity Growth: The Logistics Managers' Index indicates available warehouse capacity grew in September, but at a slower pace compared to previous months. 🛒 Shift in Consumer Demand: Post-pandemic, consumers are spending more on services rather than goods, impacting warehouse demand. 💻 Focus on Data Centers: Developers are pivoting to build data centers to support the rising demand for AI technologies. 🔄 Future Outlook: As current projects complete next year, a potential supply-demand imbalance may arise, suggesting a turning point in the cycle. Jason Price from Cushman & Wakefield notes: “There’s not this rush to get something built right away,” but hints at a potential recovery as supply and demand find balance. https://lnkd.in/g8ytKycx

Some of our Q2 findings within the article below. #supply #demand #logistics #warehouse #industrial #rents #development #construction #cwresearch #ecommerce https://lnkd.in/eDDZ6e7u

📦What’s Happening in U.S. Warehouse Market? The latest industrial real estate report from Colliers published on Material Handling & Logistics Magazine highlights key trends in the warehousing sector: 🔹 Vacancy Rates Are Up: The U.S. industrial vacancy rate hit 6.6%, but the increase is slowing down, showing signs of stabilization. 🔹 Less New Warehouses: New warehouse construction is at its lowest level since early 2021, meaning fewer new facilities are entering the market. 🔀Shifting Regional Dynamics The West saw the biggest rise in vacancies, signaling possible oversupply or reduced demand. The South held steady, showing resilience in demand for industrial space. 🔹 Rising Rents: Warehouse rents are still climbing, up 8% year-over-year, reflecting strong demand in certain regions despite overall market cooling. As new warehouse construction slows, businesses are likely to focus on maximizing the use of existing spaces through improved storage systems, automation, and optimized layouts. As we approach the end of 2024 and increasingly rely on automation, it seems this trend will continue to gain momentum in the coming year. How do you see these changes impacting the industry? Let’s discuss! Source: MH&L, Oct. 29, 2024 #materialhandling #warehouse #palletrack #selectiverack #automation #asrs #warehousing #usmarket

The industrial market has experienced nine consecutive quarters of increasing vacancy rates, shifting conditions closer to a tenant favorable market. Check out Cresa’s Q3 report for a look at the industrial market from the occupier’s perspective. https://okt.to/aKAHwq

Warehousing property market update from our property partner JLL. UK Manufacturing output rose by 1.4% in Q1, following a fall of 1.0% in Q4. The manufacture of transport equipment is making the largest contribution to growth. The largest increase within the service sector was posted by the Transport and Storage subsector which expanded by 3.7%. Key trends in the UK Real Estate market: Ø There is a limited amount of investment stock available but a strong buyer pool, which has resulted in instances of strong competition during bids. Ø YoY reduction in the take up of new industrial floorspace during 2023 vs 2022, although Q1 24 is showing resilience against Q1 23. Ø The take up of mid-box units (50k-100k) is slowing down, resulting in increasing availability of such units. Ø Space speculatively under construction has shown a slowdown of 29.1% YoY and the current total represents a 45.8% decrease compared with March 22. Ø Industrial rental growth in 2023 was 8% (2% increase in Q1 24 already) Ø Rent-wise (10k-20k sq ft spaces), marked YoY increases in the South West and Wales, West and East Midlands, Yorks/Humberside and Scotland. NIPPON EXPRESS GROUP JLL #ContractsLogistics #UKwarehousing #supplychain