Landlords Skip Rent Negotiations for Warehouse Space Amid Intense Demand

Demand for industrial warehouse space has grown so intense that landlords don’t have to list their available inventory, contracts are being signed that don’t begin for another year and there is no negotiation on rents.

Those were among the comments from CREW Network annual conference panelists Liz Dunn, Senior Vice President, Customer Led Innovation, Prologis; Alba Colavetti, Capital Partner, Senior Associate, CRG; and Angie Kim, Senior Director of Development, Bridge Industrial; in a session moderated by Jacki Christopher, Director, National Build-to-Suit Development, Ryan Companies.

“All of our warehouses are so full we don’t even have a place to keep our building materials for the next project,” Kim said. “Our tenants don’t even ask about rents. They’ll pay anything to get what they want. A lot of it’s about location and taking care of last-mile delivery.”

Dunn said, “Supply is tight and occupancy is off the charts. In 2021, in the height of the pandemic, we hit 25 percent of our capacity being from e-commerce. It’s dropped from that a bit. Off-loading container ships in ports like in Los Angeles, our customers were playing nothing but catch-up.

“The rate of rent growth is there, but it’s slowing some; it’s still higher than where we thought it would  be. We don’t even have to advertise our space because supply is so low and our broker network is so strong.”

She said that Prologis is seeing a lot of demand from foreign companies that want to have logistics space in the US to take care of customers.

Leases Signed A Year in Advance, For Shorter Terms

Colavetti said, “We have contracts signed now that won’t even start until a year or more from now.”

She added that she’s seeing some three- to five-year leases with stipulations that the lease terms be renegotiated based on turns in the economy.

Kim cited a recent increase in demand for space to serve as parking for their fleets, and customers.

“They are more than willing to pay for it,” she said. “They are asking about taking 100,000 square foot space and modifying it to fit in more parking.”

Christopher said she’s seeing increasing demand for light and heavy manufacturing warehouse space for food and beverage and Pharma companies.

GlobeSt.com recently reported about how industrial warehouse demand is “unprecedented.”

“At the same time that demand for industrial space has been lifted into orbit by e-commerce growth during the pandemic—pushing logistics networks and 3PLs to rush to establish last-mile distribution centers that offer same-day delivery—the existing inventory of leasable industrial warehouse space has been filled to capacity in major markets including New York, New Jersey and Southern California’s Inland Empire.”