The U.S. economy is at risk of a sudden deflationary spiral, according to the International Monetary Fund (IMF).
Inflation pressures are pushing up prices for warehouse and distribution space in cities such as New York and Boston. In response, tenants have seen their costs increase by over 20% per year because landlords cannot pass those increases onto them without significant losses in profits and market share from retailers who supply goods to warehouses throughout the region.,
The “warehouse rental near me” is a warehouse that has been leased to companies in the last few months. The new leases tend to be higher because of inflation pressure, which leads to more warehouses being needed.
According to a recent analysis, rental rates to replace existing multiyear warehouse leases are growing at a rapid pace, as real estate companies attempt to integrate the higher costs they paid during the epidemic into new contracts.
According to a survey issued Monday by real estate company CBRE Group Inc., industrial lease prices are up an average of 25% above rates at the conclusion of five-year contracts that ended this year. The hikes, which come as strong consumer demand and a spike in e-commerce company have caused a need for distribution space, are passing on increased supply-chain costs to customers who had long-term contracts that shielded them from growing warehouse prices.
“We don’t see any signs of demand for industrial space abating,” said John Morris, CBRE’s industrial and logistics leader, adding that the firm has never seen such significant gains.
According to CBRE, the national average vacancy rate in the United States decreased to 3.6 percent in the third quarter, down from 4.3 percent the year before and the lowest level in statistics dating back to 2002. Space is particularly scarce in crucial distribution regions like Southern California’s Inland Empire, where the vacancy rate recently fell to 0.7 percent.
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Report on Logistics
Top news and in-depth analysis on everything from supply chain to transportation and technology in the field of logistics.
According to CBRE, rental rates increased 10.4% year over year in the third quarter. With many contracts coming to an end, the latest CBRE study implies that landlords are expecting substantial increases from tenants who signed multiyear leases before the pandemic sparked a surge in industrial real-estate demand.
The rate hikes have been larger in high-demand locations, according to CBRE, when compared to long-term contracts due for renewal in the third quarter of this year. Rents in central New Jersey, Philadelphia, and the Inland Empire near the ports of Los Angeles and Long Beach to replace leases that expire this year were more than 60% higher than rates for leases that began in 2016.
According to Brent Moritz, an assistant professor of supply-chain management at Penn State University’s Smeal College of Business, shippers are embracing the growing cost of warehouse space near population centers in order to accommodate goods-hungry customers who anticipate quick delivery.
“As long as consumer demand remains robust,” he continued, the high cost of providing those clients “will not be transitory.”
The growing warehouse leasing rates are part of a broader rise in expenses throughout the supply chain, from raw material pricing to transportation costs. Transportation businesses that have been able to get high rates on the sector’s spot markets over the last year are now attempting to incorporate those prices into longer-term contracts with shippers.
According to freight industry data source Xeneta, ocean container prices in contracts lasting more than 88 days jumped 16.3 percent in November, and were 121.2 percent higher than contract rates a year earlier.
Warehouses in California’s Inland Empire are an important part of the supply chain in the United States. This Christmas season, low warehouse vacancy rates in the region, along with port delays, are creating a perfect storm of issues. Sam Rosenthal/Getty Images
According to CBRE’s Mr. Morris, warehousing accounts for 4 percent to 6 percent of a company’s total logistics expenditures, and is vastly surpassed by labor and transportation costs. “However, when their company relies on them, there’s very little an occupier can do strategically” to decrease warehouse costs, he added.
Many retailers and manufacturers are passing on higher supply-chain expenses to their consumers, contributing to October’s three-decade high in inflation.
Officials who previously said that increased costs were most likely due to the temporary effect of pandemic-related supply restrictions are now rethinking their position. Endure week, US Federal Reserve Chairman Jerome Powell told legislators that the central bank may have underestimated how long inflation would last and that the term “transitory” should no longer be used to describe increasing prices.
further information from the logistics report
Lydia O’Neal can be reached at [email protected]
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