Warehouse Space: Can you find it?
Need warehouse space? It should be slightly easier to come by into 2023. A recent Prologis report focused on Q2 2022 activity and predictions for 2023 expects a small increase in vacancies.
The reason: Demand will drop and supply chain movement will improve, which will get more products into the marketplace.
Here are some key numbers from the report:
- Vacancy rates remained at an all-time nationwide low of 3.1% in Q2.
- Rates are expected to rise to 3.2% by the end of 2022.
- Rates should rise to 3.7% by the end of 2023.
- Warehouse rents jumped 16% in the first half of 2022, because demand remained high and rents rose in response to materials inflation, land shortages, and labor and supply chain issues.
- Capacity utilization rose to 85.6%, which seems to show that no excess space existed within facilities due to higher retail sales and restocking efforts.
Looking forward, deliveries should be able to meet demand by the end of 2022, Prologis predicts, and should even exceed demand over the next 18 months. That should give those looking for warehouse space more leverage negotiating leases.
Prologis estimates that 800 million additional square feet of space will be needed for current growth and future replenishment estimates.
The report also notes that wholesale and retail inventories have risen by 7% net over the past six months alone. Taking into account current and future replenishment efforts, the ratio of inventory to sales is expected to level off at 5% to 10%, which is higher than pre-pandemic numbers.