Rents in areas in close proximity to major US airports continue to post significant gains, according to a recent study by Los Angeles-based real estate firm CBRE.
In a research brief titled “Industrial Facilities Near Airports Command Rent Premiums,” CBRE explained that companies are locating distribution operations closer to airports or air cargo ports to address various challenges, most notably rising transportation costs, which they say are responsible for 45% to 70% % of total supply chain costs – based on data published by the company’s subsidiary, CBRE Supply Chain Advisory. That’s a steep increase compared to usage costs, which are 3% to 6%, CBRE said.
Additionally, CBRE said that in an analysis of the 20 busiest U.S. airports for air cargo, average warehouse rents located within a five-mile radius of major airports are 18.8% higher than the average for their metro areas .
CBRE found that the US airports with the highest rental premiums are Los Angeles (LAX) at $23.02, New York (JFK) at $32.35, South Florida (MIA) at $13.33, Chicago (ORD) at $13.33 $7.73 and Philadelphia (PHL), at $10.00. It explained, “These airports serve markets that are dense and lack arable land, and contribute to rental premiums of 24% or more on properties within a five-mile radius of them. Rental growth is likely to accelerate in these markets due to severely constrained supply and increased transportation costs.”
James Breeze, Global Head of Industrial & Logistics Research at CBRE, said in an interview that being close to a major transportation hub, be it air, land or sea, will save residents money in the long run, increasing demand for those spaces and therefore Rent.
The report added that 3PLs (third-party logistics service providers) account for the largest number of leasing activity so far in 2022 at 42.7%, topping the segment’s share of total warehouse leasing at 35.6%, followed by general retail and wholesale Corporates with 32.2% and Food and Beverage companies with 5.2%.
When asked if 3PLs are likely to continue taking responsibility for this type of leasing activity, Breeze said CBRE continues to see outsourcing sales to 3PLs on a larger scale and doesn’t see that changing anytime soon.
“Users are outsourcing distribution because of the difficulty of finding space, work-related challenges, economic uncertainty and higher supply chain costs,” he said. “This trend really picked up speed during the first COVID-19 outbreak. Many residents saw the benefit of using 3PLs during this period of uncertainty, and the trend continues to grow. Like any type of user, 3PLs want to save costs and can benefit from being close to important transport hubs.”
Regarding the biggest challenges users face, Breeze pointed out that the scarce supply is the biggest challenge when it comes to securing space.
“Vacancy rates for products near transport hubs are lower, and available land is hard to find, so there will always be an imbalance between supply and demand,” he said. “This difficulty in finding space is why outsourcing to 3PLs continues to increase.”
John Morris, president of Industrial & Logistics at CBRE Americas, said in a statement that the immediacy of e-commerce delivery and the generally faster pace of business than in previous decades, among other things, have made airport warehousing a critical link in many supply chains. And he noted that rents on these properties will continue to outperform their market averages for the foreseeable future.
About the author
Jeff Berman, Group News Editor Jeff Berman is Group News Editor for logistics management, Modern conveyor technologyand Supply chain management review. Jeff works and lives in Cape Elizabeth, Maine, covering all aspects of supply chain, logistics, freight transportation and material handling on a daily basis. Contact Jeff Berman