Renters of industrial properties are facing sticker shock in the current inflationary environment, with national effective rent growth expected to increase nearly 23% year over year in 2022.
"Although industrial has a reputation for shorter lease terms, the reality is that the weighted average lease term for industrial is around five to seven years, much like it is for office," write Cushman & Wakefield economists Rebecca Rockey and James Bohnaker in a new analysis. "Many of the leases that are rolling today are therefore significantly underpriced on the tenant side, especially with escalations that may have been negotiated five to seven years ago."
And depending on the escalations occupiers have incurred, Rockey and Bohnaker say the market value of rent payments could be underpriced by anywhere from 85% to 134% when leases roll.
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