Industrial Real Estate Vacancy Rate Decreases as E-Commerce Grows

Growth in e-commerce and consumer products industry is driving the increase in demand for industrial real estate not only in the United States but also in other parts of the world such as the United Kingdom, Japan and China.

In a report by JOC, the vacancy rate in the U.S. among warehouses and distribution centers hit 6.4 percent in 2015, the lowest level in 15 years. The market is expected to get even tighter as demand outpaces supply. The record-low vacancy rate is attributed to the increasing e-commerce sales and improving consumer demand particularly in top markets such as South California, Dallas and New Jersey.

According to the report, net absorption in 2013 was at 200 million square feet, which Blaine Kelley, senior vice president of the global supply chain practice for CBRE, might increase to between 220 million and 240 million square feet this year. On the contrary, new constructions is estimated to be just around 160 million to 180 million square feet, way below the demand driven by the anticipations that the e-commerce and consumer product sectors will continue to grow.

Of the total U.S. retail sales in 2015, 7 percent comes from online sales amounting to $350 billion. While it may look small, it is expected to more than double this year at 15 percent.

"We expect vacancy rates to stay in the 6 percent range through 2020," said Richard Thompson, director of global supply chain and logistics solutions for Jones Lang LaSalle. "It may not be as low as this year, but it will still be very tight because spec construction is not keeping up."

Meanwhile, the report said that the U.K. is also experiencing a strong demand for space, and the same goes for Japan and China where a lot of industrial space are being constructed.