Exponential growth online store and the logistical nightmare caused by the coronavirus pandemic have boosted demand for deposits in the United States, and investment funds are placing big bets on this market.
“It’s hard to find a place that works for clients,” explains Michael Schipper of Blau & Berg, a brokerage specializing in commercial real estate in New Jersey and New York.
The share of free space has been decreasing for a year and a half and reaches 3.4%, despite the fact that more than eight million m² of new warehouses and facilities were built in the first quarter of 2022, according to the Jones Lang real estate company. LaSalle.
Demand is such that in just six years, purchase prices have tripled or quadrupled in the region served by Schipper, in northern New Jersey. In the case of rentals, the average price has risen 22% in two years in the United States, according to a study by consulting firm Beroe.
“THE logistics and e-commerce distribution are the catalysts for this need for space in the US market,” according to Beroe, noting that demand has exceeded supply for 18 months.
Shop and last mile
On the other hand, unlike traditional warehouses, online order preparation requires space with enough technology, explains Mark Manduca, head of investments at GXO, which offers logistics solutions for companies.
This equipment, which requires a huge investment, makes it possible to “improve the efficiency of the site and accelerate the activities of the warehouse to meet the demand for same-day delivery”, explains Beroe.
Developed by Amazon, the new standard for instant delivery eventually forced itself on the Seattle giant’s big competitors who had to chase it.
After Amazon, “many companies accelerated the development of their online offer”, points out Manduca. “They are the ones who drive the demand for deposits for the last kilometer”, that is, the “last mile”, that is, they allow you to reach your final destination directly.
The dictatorship of instant delivery has forced many brands to increase the number of warehouse locations to get closer to their customers, especially in urban areas where real estate was already expensive.
The pandemic fueled a movement that was already developing and increased e-commerce revenue by 56% between early 2020 and early 2022.
Correction in sight?
Another effect of Covid-19: the logistical inconvenience caused by the closure and health restrictions.
“We had misplaced containers, supply issues and, more recently, overstock,” Manduca recalls.
To limit these risks, this expert explains, many companies are “looking for production locations closer” to their markets, “and this increases the demand for warehouses.”
“We’re seeing an increase in companies increasing their inventories to alleviate supply issues,” which is why they are looking for additional storage space for products, Jon Gray, number two at investment firm Blackstone, said in April.
Blackstone is one of the companies that has invested a lot in the sector and currently has deposits worth 170 billion US dollars. It competes with Prologis, the world’s number one in the field.
Other investment capital giants, such as KKR, Carlyle, Apollo or Sweden’s EQT, bought sites to take advantage of the ‘warehouse’ storage boom.
“The outlook for this market is positive in the long term, but we need to take a break,” warns Michael Schipper, for whom the tightening of credit conditions that is taking place could be overdone. “You cannot continue on this trajectory (of growth in the sector) indefinitely,” he reflected.
Among the signs of a possible correction is Amazon’s decision to lease or renegotiate the lease of more than 2.7 million square meters of warehouse space.
“We will see a drop in demand and rents will stop rising at this rate,” Ward Fitzgerald, director of EQT Exeter, a subsidiary of EQT, warned The Wall Street Journal.
“The question,” according to Michael Schipper, “is how much and for how long.” Nobody knows”.
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Source: AFP, via UOL