CBRE Analysis Finds That Industrial Rents Support Additional Warehouse Development

07 Jun 2018

warehouse

CBRE Finds That Pro Forma Rents Significantly Exceed Breakeven Rents In Central NJ

Projected rents are more than adequate in many markets to justify additional development of warehouses and distribution centers, according to a new report from CBRE.

CBRE analyzed the gap between pro forma rents in various markets – the rental rates that developers can reasonably expect to obtain on newly built warehouses – and breakeven rents, which are the rents they’d need to cover overall development costs. In the 10 major markets that CBRE examined, the former exceeded the latter by 20 to 40 percent.

These spreads also confirm that the current market for Industrial & Logistics real estate has growth remaining. Typically, a sign of waning momentum for a market comes when spreads between pro forma and breakeven rents narrow or vanish.

CBRE’s analysis found the largest rent spreads in cities such as Chicago (43 percent), Atlanta (38 percent), Phoenix (35 percent), Pennsylvania’s I-78/I-81 corridor (30 percent) and in Central New Jersey (21 percent).

“Central New Jersey’s 21 percent spread between pro forma and breakeven rents is indicative that warehouse development remains extremely profitable,” said Mindy Lissner, executive vice president, CBRE. “The market’s strong demand for quality industrial space has continued unabated over the past few years and predictions show it will remain a major trend moving forward. Given both market dynamics, development of new product makes perfect sense for investors, developers and space users.”

To view the report, click here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.