Competition for industrial real estate intensifies around ports

June 23, 2022

Miami leads the port markets, with a whopping 53.3% year-over-year increase in rental growth, followed by Los Angeles with 45% growth, Orange County with 27%, New York/NJ with 26%, and Boston with 22.9%. To round off the top five. Port of New York/NJ

Industrial real estate is one of the most sought after types of real estate nationwide, which has led to a decrease in the number of vacancies and increased competition between investors and tenants. When it comes to choosing a market for industrial investment, port markets are emerging as the safe bet for investors to raise capital due to a positive rental growth profile, according to the Real Estate and Investment Management Company. JLL.

With an average vacancy of 2.8%, port markets were well below the national average of 3.4% for industrial products at the end of the first quarter of 2022. Additionally, looking at new construction rates, 22.1% of the total new inventory that Built in the industrial sector, the market was delivered during the first quarter in the port markets.

JLL is a professional services company that specializes in real estate and investment management. The company is a Fortune 500 member with annual revenue of $19.4 billion, operates in more than 80 countries and has a global workforce of over 100,000 as of March 31, 2022. JLL is the brand name and registered trademark, Jones Lang LaSalle a company

“Both investor and occupier demand from the pandemic along with new buildings being delivered to market has boosted rents demanded,” said John Hugginard, JLL’s senior managing director at Capital Markets, in a prepared statement. “This highly competitive environment continues to drive average rental demand in port markets to new highs.”

When it comes to year-on-year rental growth, the port markets saw a 23% increase in required rent, while the non-port markets increased by 16% compared to the first quarter of 2021 to the first quarter of 2022.

Miami leads the port markets, with a whopping 53.3% year-over-year increase in rental growth, followed by Los Angeles with 45% growth, Orange County with 27%, New York/NJ with 26%, and Boston with 22.9%. To round off the top five.

While recent interest rate increases have weighed on the sector, the effects on pricing and overall demand from investors will not be uniform across markets. Additionally, these coastal cities present an attractive opportunity for investors looking to secure long-term NOI growth, despite the nearly 40 basis point pricing premium.

“Industrial assets are traded in the port markets for a premium,” said Trent Agnew, JLL’s senior managing director at Capital Markets. Despite the fact that port markets are more expensive, it still presents itself as a better game in the long run for investors. The lack of land available for development, as well as other impediments to new supply, are expected to push the ownership fundamentals beyond 2022.”

Tenants with operations closely linked to the ports have demonstrated their commitment to their space by extending lease contracts, causing high demand as other tenants seek to enter the playing field. This is particularly evident in the industrial markets of Los Angeles and Long Beach. In addition, markets near ports that have recently expanded are experiencing the strongest growth in demand for industrial space.

“Despite the spread of the pandemic and disruptions to the global supply chain, many ports are experiencing their busiest year ever for containers,” said Nick Rita, director of industrial research for capital markets at JLL. “Southeast ports are seeing jumps in TEU volume, as congestion hampers other major ports along the West Coast.”

Leave a Reply

%d bloggers like this: