Very appropriate article written by Randyl Drummer, Costar News
April 3, 2020 considering current economic climate. Call me or email me to discuss.
Not all businesses are shut or relegated to the sidelines as the coronavirus crisis closes huge swaths of the American economy. Online retailer Amazon, shipping company FedEx and other businesses signed hundreds of leases for warehouse and logistics space in the first weeks of the pandemic’s spread across the United States.
Costar researchers recorded more than 785 industrial lease deals totaling over 14 million square feet between March 16 and April 1 as companies and government agencies raced to accommodate a massive shift to online ordering, as well as added demand for pickup and delivery from closed bricks-and-mortar stores and food providers, CoStar senior economist Abby Corbett said in the company’s latest State of the Industrial Market update. Shipping, distribution and online-fulfillment companies as well as government agencies are scrambling to lock down warehouse space to accommodate stockpiles of food, medical equipment, staple products and other necessities. Amazon, with plans to hire 100,000 new workers to help manage the surge in online shopping and delivery, has been one of the most active deal-makers since March 16. That’s when President Trump urged Americans to avoid travel and large gatherings and the San Francisco Bay Area imposed one of the nation’s first stay-at-home orders.
FedEx inked a deal for a 540,000 square foot bulk distribution center in Kansas City, Missouri, and Amazon leased large distribution centers in Sacramento, California; Little Rock, Arkansas; and Dallas in the past couple of weeks. Yet, the Seattle-based e-commerce company’s activity represented just 4% of all space leased since March 16.
The brisk leasing, however, doesn’t offset the sobering reality for owners that tenants are signing leases at deep rent discounts averaging 12% as companies sprint to finish deals with society and much of the economy shutting down. Manufacturers, many of them idled or coping with severe disruptions and inconsistent demand, have taken almost no space since mid-March. Completions are still on pace to hit a 10-year high in 2020, reaching over 350 million square feet. And nearly 54% of the 454 million square feet under construction remains speculative.
Markets with the most pronounced risk from the added supply curbing rent increases include Austin, Texas; Savannah, Georgia; northern New Jersey; Las Vegas; Houston; Dallas; and Atlanta. Still, warehouse owners may fare better than some other commercial property landlords during the pandemic because factories and warehouses play an important role in the country’s recovery, Corbett said.