Last Mile, E-commerce Continue to Eat Up Warehouse Spaces, Notes Augusto Beato

Portland SEO's Augusto Beato warned online retailers of higher warehouse rents due to strong e-commerce penetration and tight market conditions for suitable last-mile fulfillment operations.

"While the continuing tight domestic market is boosting an increase in development of multistory facilities in urban locations, still there remains a shortage in warehouse spaces," notes Beato, who is the CEO of Portland SEO.

Vacancy rates for industrial and logistics space, including e-commerce fulfillment, is at a historic low of 4.3 percent and new construction is constrained, leading to limited expansion options for warehouse occupants and higher rents, according to a report by commercial real estate brokerage CBRE.

Availability rates for multistory warehouse facilities have decreased by 27 percent since 2014, with rents increasing by 20 percent.

With consumers expecting faster delivery times, there’s a looming shortage of urban infill sites for new last-mile delivery, prompting developers to build vertically, according to the CBRE report.

The continued push of e-commerce companies into opening up physical spaces, as well as traditional retailers restructuring their distribution networks to meet e-commerce demands and limited new construction, will drive down net space absorption and keep vacancy low into 2019, CBRE found. The vacancy rate has been below 5 percent since the first quarter of 2016.

Furthermore, a dramatic increase in imports ahead of September tariffs – up 4.8 percent in August – also pushed up inventory carrying costs for e-commerce and retail companies and contributed to the warehouse supply gap, CBRE found.

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