Why Rents Are Soaring in Otherwise-Obsolete Industrial

Chiate: “Rent spreads are currently 10% between class-A and -B/C buildings, whereas just two years ago spreads for these same classes were as much as 30% to 40%.”

IRVINE, CA—Last-mile industrial is bringing new life to outmoded facilities that are well located, and rent spreads between classes are expected to continue tightening as more last-mile users target these spaces, Cushman & Wakefield’s executive managing director, industrial capital markets, Jeff Chiate tells GlobeSt.com.

According to a recent report from the firm, the strong demand generated by e-commerce has put significant upward pressure on rental rates for both class-A and -B assets. As the e-commerce industry continues to explode, companies are intently focused on getting the product to the consumer quickly and efficiently via the “last mile”—which will remain a primary generator of demand ahead. As a result, well-located class-B properties, which five years ago may have been considered obsolete, are now highly sought-after spaces in the infill Orange County markets.