In the land of industrial property sales and leases, e-commerce is king.
Companies that sell products online dominated the market for industrial space in 2018 and their reign is expected to continue.
That’s the take of real estate firm CBRE as it measured up the industrial real estate market nationally and in the Greater Lehigh Valley.
In a report analyzing industrial leasing activity in the U.S. last year, CBRE found that e-commerce and logistics companies accounted for 61 percent of the largest 100 industrial property deals by square footage in 2018, totaling 61.5 million square feet. Many logistics companies handle e-commerce distribution, CBRE said.
In the previous year, those two sectors claimed 52 percent of the largest deals for a cumulative 43.2 million square feet, according to CBRE.
Overall, the report showed, the largest 100 industrial transactions accounted for 100.3 million square feet across the U.S., ranging in size from 742,000 square feet to 2.3 million.
Fifty of the 100 deals were for warehouses sized 970,000 square feet or more, reflecting demand for large, tall, modern buildings, the report said.
The transactions spanned 32 markets, with the Inland Empire in California, the I-78/81 corridor in the Lehigh Valley, and Dallas/Fort Worth recording the largest volume of transactions by square footage, the report said.
The largest 100 industrial property transactions got larger last year, regardless of industry, according to the report. They represented 19 percent more space than the largest deals of 2017.
The leases spanned uses that include e-commerce, logistics, manufacturing, food and beverage, technology and retailing.
Weighing in from CBRE on the regional implications of the report is Vincent Ranalli, senior vice president of CBRE.
Lehigh Valley Business: Is it surprising that Pennsylvania had this many deals in the top 100 industrial leases?
Ranalli: Not at all. The Pa. I-78/I-81 corridor is regarded by many as one of the top industrial markets in the country. Our geography and access to the large population along the East Coast is an optimal place to establish a distribution center. Looking ahead, we expect 2019 to be equally as strong, or better.
LVB: What changes do you see happening in the logistics sector in the next five years?
Ranalli: ‘Best in class’ properties [the highest-quality buildings in a market] will continue to evolve. We expect to see higher ceiling heights, more efficient building systems and amenities to keep a positive environment for the workforce. Companies are working hard to keep their employees, as the labor market remains very tight.
LVB: What are some challenges that the industry faces?
Ranalli: Labor, labor, labor. With unemployment nearing all-time lows, companies need to find new ways to attract/retain employees or invest in automation.
LVB: What areas of Berks County showed growth? Any specific projects?
Ranalli: The I-78 corridor west from Hamburg to Bethel Township has seen explosive growth. Good sites with easy access to I-78 are getting interest from tenants. Lease rates are favorable here compared to other submarkets.