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Construction & Design

Warehouse construction surge lifts land prices

The e-commerce-fueled surge in development of warehouses and distribution centers has generated double-digit, year-over-year percentage increases in prices for industrial land in major U.S. markets, according to a new report from CBRE.

CBRE found that the average price for large industrial parcels of 50 to 100 acres – usually earmarked for construction of large, regional warehouses – increased to more than $100,000 per acre from roughly $50,000 a year ago.

Similarly, industrial plots of five to 10 acres – often suited for construction of smaller, infill distribution centers in urban or suburban settings – increased to more than $250,000 per acre this year from roughly $200,000 a year ago.

“Escalating land prices are a big reason why new supply of U.S. warehouses and distribution centers hasn’t kept pace with strong demand in recent years,” said David Egan, CBRE Global Head of Industrial & Logistics Research.

“This situation won’t go away any time soon, because the markets where distribution centers are most in demand – typically near or in densely populated city centers – have scant available land for industrial uses.”

CBRE found double-digit percentage increases in land prices in major industrial markets, including California’s Inland Empire (up 35 percent this year to $980,000 per acre), Northern New Jersey (up 17 percent to nearly $1.8 million), Las Vegas (up 17 percent to $220,000), Chicago (up 16 percent to $250,000), Atlanta (up 14 percent to $100,000) and Houston (up 14 percent to $196,000).

In many cases, the markets that registered substantial gains in land prices also saw increases in average asking rents.

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