Cushman & Wakefield’s 2019 North American Industrial Outlook report, which was released last month, shows that continued double-digit growth in e-commerce will boost demand for industrial properties through 2020, including urban depots, sortation hubs and cold storage facilities. However, finding qualified workers will remain a major challenge — and the ones hired could command higher wages.
North American industrial absorption is predicted to hit 495 million square feet in 2019-2020, according to the report. By the end of 2020, 550 million square feet of new industrial product is expected to go online.
“This has been the second-best three-year cycle ever for industrial,” said Carolyn Salzer, Americas logistics and industrial research analyst for Cushman & Wakefield, during a webinar marking the report’s release. “Over the past several decades, industrial real estate has had some incredible runs, and that’s not stopping now.”
For eight straight years prior to 2018, the supply of new industrial properties had trailed demand, but not anymore, she said.
“Supply finally caught up with demand and even surpassed it,” Salzer said. “The market just needs this product.”
With supply now exceeding demand in North America, industrial vacancy rates across the continent will hover around 5 percent. Average asking rents should rise from $6.24 per square foot to $6.68 per square foot by the end of 2020.
In the U.S., net absorption is expected to exceed 245 million square feet this year, and Canada will reach 33.6 million square feet of net absorption. While Toronto will make up more than half of Canadian occupancy growth, the report says there also will be “broad-based improvement” across all markets in that country.
In Mexico, improved trade relations with the U.S. will benefit the northern state of Monterrey. However, Mexico City will remain “dramatically undersupplied,” according to the report, with net absorption of 11 million square feet and new deliveries of 6.5 million square feet by the end of 2020.
While the industrial outlook for North America looks strong, finding qualified workers remains a major challenge.
“The No. 1 topic right now is labor,” said Jason Tolliver, vice president and head of industrial research for the Americas at Cushman & Wakefield. “Finding labor and retaining labor is the No. 1 factor in siting decisions. They’re really focused on an appropriate depth of the labor pool. That’s critically important.”
As part of the effort to attract talent, Tolliver said “the amenitization of warehouses” will be a trend to watch. “We’re starting to see changes in designs,” he said.
Facilities will continue to emphasize the efficient movement of goods, but they’ll start to provide additional enhancements to retain workers. Tolliver said this could include greater digital connectivity, as well as physical amenities such as fitness centers, lounges and walking paths.
Additionally, multistory facilities will become more common to handle surging e-commerce traffic. These warehouses will be equipped with increasing levels of high-tech solutions such as robots and cobots, which are smaller robots that assist humans with tasks.
There will also be increasing demand for facilities located within 5 to 7 miles of major urban centers. Because of that, the cost of land for infill developments will keep rising.
Development magazine has been paying close attention to trends in the industrial sector for several years. For example, “Industrial Real Estate 2018: Disruptions and Structural Shifts” examined automation, robotics, cold storage facilities, amenities for warehouse workers and more. Look for all of these trends to gain greater importance in 2019 and beyond.
Trey Barrineau is the Managing Editor, Publications for NAIOP. In this role, he supervises day-to-day operations of Development magazine.