Anticipate West Coast Warehouse Growth to Soar

Kurt Strasmann

Kurt Strasmann is managing director at CBRE.

Inventory development is booming across the country, and a recent report from CBRE shows that the west coast is leading the country in developing new camps. While experts expect the construction pipeline to keep growing as long as there is no trade war or increased tariffs. Ultimately, the strong demand for storage outstrips supply, which will further fuel construction activity.

"[The warehouse development will continue to increase], provided we do not have a persistent wage conflict." Kurt Strasmann is managing director of CBRE in Orange County and Inland Empire at CBRE, says “Developers and capital are very optimistic about the industry. Demand is expected to keep up. In 2018, the west coast market benefited from strong activity that increased net absorption to over 48 million square feet. Since most markets are below the national vacancy average, supply has to keep pace with demand. "

Demand has exceeded supply for years, and even in the event of a trade war, there will continue to be a shortage of inventory in the western US. “Since 2015 the demand for warehouses on the west coast has exceeded the completion of new warehouses by 20 million square meters,” says Strasmann. "This trend is expected to continue unless there is an unforeseen economic crisis."

The Seattle / Tacoma, Bay Area, Los Angeles and Inland Empire markets are the strongest markets on the West Coast, and all have solid fundamentals and extensive inventory development pipelines. “All of these areas have excellent business infrastructure, high population densities, and port entry points that are the fastest and cheapest method of transport for goods coming from Asia to the US,” says Strasmann. The Inland Empire leads the West Coast market for new warehouse construction.

Given this strong demand, these markets naturally have extremely low vacancy rates and rising rents – factors that trigger strong speculative developments. "Due to the strong demand in these markets, vacancies in most of them were below the national average of 4.4%, which led to a more speculative development to keep up with current and expected demand," says Strasmann. “As a result, the scope of specification development has increased compared to custom development. Demand from ecommerce users, 3PLs, wholesalers, and food and beverages is the key industry driving demand. "


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