In addition to climbing rents, industrial tenants are faced with higher annual lease escalations, operating expenses and utilities as competition for space remains elevated, according to a new report from Newmark.
The total cost to occupy warehouse space has increased 42.2% since 2019. Rent has been the biggest driver, but rent and non-rent expenses alike contributed significantly to the growth.
Acute supply/demand imbalance and increasing construction costs caused rent growth to soar during the past few years, and yet, "for a sector in which tenants are predominantly on triple-net leases, rent growth is only part of the story: nearly all occupancy costs are increasing, not just at lease signature, but over the lifetime of the lease," Newmark reported.
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