Developers should take care not to introduce market glut into the industrial sector, report warns
New warehouse supply in North America will likely exceed demand over the next two years, according to a new analysis by Cushman & Wakefield PLC.
Over the last few years, industrial properties have come to the fore as vital components of the Canadian commercial market, and the burgeoning e-commerce segment will only amplify this trend.
In late 2019, PwC Canada national real estate leader Frank Magliocco told the Financial Post that this accelerated pace should come as no surprise.
“It’s a direct result of the increasing penetration of e-commerce sales. Because of that ride, there’s a massive demand for fulfillment space that will grow even more in the near future. It’s as simple as that.”
The emerging expectation for same-day delivery among consumers, in particular, is stimulating demand for spaces located no more than one mile away from major habitation and transportation hubs.
Industrial properties dedicated solely to pre-delivery storage are also becoming even more important, with cold storage (mainly for food items) becoming especially valuable.
At the same time, Cushman & Wakefield warned that developers should take care not to introduce market glut.
“Overbuilding is definitely something we need to keep an eye on,” Cushman & Wakefield head of logistics and industrial research Carolyn Salzer told the Wall Street Journal.
Cushman & Wakefield predicted that approximately 301 million square feet of new warehouse space will become available for use across the continent this year. Total space leased in Canada, Mexico, and the United States will likely reach 242 million sq. ft. during the same period.
Ample supply will be the running theme until 2021, when the market is expected to see 272 million sq. ft. of new warehouse space, amid demand for just 218 million sq. ft.
