CSCMP's Supply Chain Quarterly
October 19, 2018
Forward Thinking

Demand rises for logistics and industrial space in the Americas

Vacancy rates have dropped in the United States and Mexico, while availability has increased in Brazil and parts of Canada.

In spite of the overall sense of economic uncertainty—both globally and regionally—demand for industrial and logistics properties in the Americas continued to rise in the third quarter of 2016, according to a recent report from the commercial real estate firm CBRE. "Americas Industrial & Logistics Trends Report," which came out in November, is based on a survey of more than 950 CBRE industrial brokerage and investment professionals in the Americas.

In the United States, vacancy rates dropped to 5 percent and availability fell to 8.4 percent, according to the report. Part of the reason vacancy rates have dropped is that leasing demand is outpacing new construction, making supply tight. The majority of that demand is being driven by companies in the e-commerce, third-party logistics, and food and beverage industries, according to the report. As a result of this demand, asking rents have increased by 1.7 percent in the third quarter and 5.2 percent year over year. Class-A distribution space is particularly tight, with many markets reporting vacancy rates below 2 percent.

Meanwhile, in Canada national availability has held steady at 5.5 percent, with some areas seeing more demand than others. For example, Toronto and Vancouver have record-low property availability, due in part to land constraints, according to CBRE. Calgary and Edmonton, on the other hand, are seeing record-high availability, perhaps due to disappointing manufacturing performance in the country.

This is in sharp contrast to Mexico, which continues to see increased manufacturing output and strong demand for industrial and logistics property, particularly in Mexico City.

In contrast to other parts of the region, vacancies are still quite high for logistics and industrial space in Brazil, especially around São Paulo. The city, which is Brazil's financial center, has seen 4.5 million square feet of industrial space added to the market while rents have dropped by 5.9 percent year over year.

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