Vacant warehousing space near zero

[Mikkel]

Recently, I have been calling numerous public warehousing companies who would be willing to store some biotech products on the East Coast of the United States. Originally I started reaching out to 5 public warehouses that spanned three different states. Aside from the fact that I learned many of these warehouses did not meet the standards that are required for biotech products, I also learned that all of their warehouses were either full or nearly full capacity.

Due to the strict standards my company is looking for, GMP and FDA-compliant warehousing, I reached out to a company that has developed a network of trusted warehouses. I was shocked to learn that no public warehouses, within their large network, could meet my needs within the Northeast. So I decided to expand my search to the ENTIRE United States.

The number of companies willing to work with me:

ONE, in Texas.

Really? I'm sure part of this to blame is that this network does not include every single warehouse in the USA or maybe that I am too new of a company to want to do business with, which I can understand.

Though I can't help but think another reason is the lack of warehousing space. I found this article:
'Unprecedented' – vacant US warehouse space near zero and rents soaring

For those who do not wish to read the article, here is a quick summary:

• Warehouse vacancies in the US are LESS THAN 4%
• The cost of building a warehouse is 21% HIGHER than a year ago
• 25% of industrial buildings are more than 50 years old
• 75% of the existing supply was built OVER 20 years ago
• The average age of industrial buildings is 42 years old
• Older logistics facilties have lower ceilings, fewer dock doors, etc. which is not suitable for e-commerce
• Industrial rents have risen by 37% over the past 5 years
• Forecast Estimates: US Rents to increase by 22% overall with coastal markets seeing 25-26%

On the flip side, I recently read an article saying Amazon is looking to scrap plans for dozens of warehouses due to slowing sales growth. Could this be a leading indicator that warehouse vacancy will increase as inflation rises and the economy falters?

What are you guys seeing out there? Any predictions?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Antifragile]

What are you guys seeing out there? Any predictions?

I develop, build warehouses and sell them. It’s been very good business over the past 8 years. Vacancy in Vancouver is 0.4%!

Costs have gone up a lot, like your article says and even more in some areas.

Our latest project is completing this month!!!



Predictions? Hmmm… as long as economy is doing well, and vacancy is near zero… expect high prices.

 

[Mikkel]

@Antifragile Nice looking warehouse! A 0.4% vacancy rate, I'm glad I am not looking for warehousing space in Vancouver at the moment!

Those warehouses look quite similar in size and style to what I was originally looking to lease. I just realized trying to get GMP and FDA compliant while having a 3-year lease was far too much work and too much risk for a new business.

I wonder even with a slumping economy, if inflation continues to rise, companies may still opt out of just-in-time supplies and stock up on products so they can buy products before inflation further eats away at their margins. Also, just-in-time supplies seem to become less and less reliable with our broken supply chain.

I know our strategy will be to warehouse ~3-months' worth of supply at a time to ensure we stay stocked up with products.

I suppose only time will tell.

 

[MJ DeMarco]

Is there an opportunity here? Like a warehouse sharing system, the AirBnb of warehouses?

It is interesting you couldn't find any partners, perhaps the data is more about inefficiency in exposing vacant square footage, than it is about not having it.

Perhaps @Envision could comment, he owns a big warehouse up in Idaho, I think he might have mentioned leasing part of it out.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Dockid]

I develop, build warehouses and sell them. It’s been very good business over the past 8 years. Vacancy in Vancouver is 0.4%!

Costs have gone up a lot, like your article says and even more in some areas.

Our latest project is completing this month!!!
View attachment 45041


Predictions? Hmmm… as long as economy is doing well, and vacancy is near zero… expect high prices.

Do you search for storage using some kind of website that displays all available storage units in the US?

 

[Mikkel]

Do you search for storage using some kind of website that displays all available storage units in the US?

I used a company that matches warehouses with businesses that need warehousing space. This company apparently screens all the warehousing companies before allowing them into their network.

I was looking specifically for a public warehouse where I could leverage the infrastructure of an already established warehouse to help move my products(at least to start off). If I were to look for warehousing space to lease like what @Antifragile has built, I would probably be searching via LoopNet or something similar. However, a public warehouse is a bit different. I had been calling the warehousing companies directly. Since the "gatekeepers" typically are not disclosing their capabilities or vacancy rate, I had been harassing them so I can talk to someone who would have that information. I called each warehouse a minimum of 5 times over the course of 2 weeks just to get a call with someone who had any valuable information. Not a viable strategy when trying to find a needle in the haystack.

Using the networking company that I used seemed to be a more effective method to find a specialized warehousing company.

 

[Antifragile]

For our units, we use local real estate brokerage firms for both sales and leasing. We are based in Canada, so I do not know how it works in the USA.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Mikkel]

For our units, we use local real estate brokerage firms for both sales and leasing. We are based in Canada, so I do not know how it works in the USA.

I'm not sure about the sale of warehouses, but this was my experience when looking to lease warehousing space.

 

[17thgreem]

I am a commercial real estate broker with a strong focus on industrial and land, and now finally have gotten into developing raw land myself with a partner, which has been my dream goal since starting in the business in 2018. we currently have two high-res/high density land deals zoned and under contract with other ground up developers.

I've been a long lurker here, most likely since starting in brokerage, and have often thought about posting about this in some capacity for a long long time...but yes, a massive opportunity for certain folks within right markets, net works, networths, or sales ability. But I can put some added flair for yall. Some context--

I used to have a client that i repped from Landlord rep on leasing side that had 500,000 SF of small bay (low end 1000/sf high 1600/sf). The portfolio ended up just taking too much away from the large portfolio investment deals I was pursuing at time, and i was unorganized as shit at time, so i ultimately bowed out, but the owner told me they mainted a 94% occupancy rate all through 08 -10'...

Lemme crank it up a notch. Rough lease math for different bldg sizes are below:
60,000 SF WH - $6.50/sf NNN
10,000 SF WH - $8.50/sf NNN
1200 SF Unit - $12.50/sf MG

When shit hits fan its like trickle down RE... 60 downsizes to 20, 10 downsizes to 1500, and holds on for dear life. And instead of losing one major tenant and your shot to hell, you can lose 60% of a 60ksf bldg of 1.5k sf units and still cover note, ins, CAM, etc

I could expand so so so much more, with different models, construction, etc but it should be noted in my market (major southeastern comm hub) all segments of market are very resilient outside of big box office.

I know how I would approach if I were to attempt to take advantage of the aforementioned, but no time now to type it out.