United States: First Union victory in an Apple Store

NEW YORK: Demand for warehouses in the United States has risen due to the rise of e-commerce and the logistical nightmare of the coronavirus epidemic, a trend that has not escaped investment funds, who are making big bets in this market.

“Finding a suitable location for clients is an insane battle,” said Michael Shipper of Blue & Berg, a broker who specializes in commercial real estate in New Jersey and New York.

According to real estate company Jones, free space rates have been steadily declining for a year and a half and now stand at 3.4%, although more than 8 million square meters of new warehouses were delivered in the first quarter of 2022. Lang LaSalle.

Demand is such that in just six years, the purchase price has multiplied by 3 or 4 in the area covered by Michael Shipper of North New Jersey. For rent, the average price in the U.S. has risen 22% in two years, according to the firm Beroe.

“Supply and distribution for e-commerce is the catalyst for this need for space in the American market,” said Bero, who noted that demand has outpaced supply for 18 months.

Last mileA

In addition, technologically advanced warehouses are required to prepare orders placed on the Internet, unlike traditional storage sites, noted Mark Manduka, chief investment officer at GXO, which provides logistics solutions to companies.

This tool, which requires massive investment, “improves the efficiency of a site and accelerates warehouse operations to meet the demand for same-day delivery,” Bero explains.

Invented by Amazon, the new standard of instant delivery has put pressure on the Seattle Giant’s main competitors, who had to align themselves.

Behind the Seattle Giant, “many companies have accelerated the development of their online offer”, underlines Mark Manduka. “They are the ones who run the demand for warehouses for the last kilometer”, “the last mile”, meaning that makes it possible to reach the final destination directly.

The urgency of instant delivery has forced many brands to multiply storage locations to get closer to customers, especially in urban areas where real estate was already expensive.

The epidemic spurred a movement that was already working, leading to a 56% increase in e-commerce revenue between 2020 and early 2022.

A fix soon?

Another cowardly effect is the great logistical mess caused by captivity and health restrictions. “We had containers in the wrong place, had supply problems and recently had excess stock,” recalls Mark Manduka.

To limit these risks, he said, many companies are “looking for production locations” near their markets, which “increases the demand for warehouses”.

“We’re seeing companies take a leap to increase their inventory to ease supply problems, and so we’re looking for extra space to store them,” said John Gray, the number two investor in Blackstone, in April.

Blackstone has invested heavily in the sector and currently owns 170 170 billion worth of warehouses. It now competes with the world’s number one prologue.

Other private equity giants, such as KKR, Carlyle, Apollo, or Sweden’s equity, have bought sites to ride the wave of “warehousing”.

“The outlook for the warehouse market is positive in the long run, but we need to take a break,” Michael Shipper warned, adding that the tightening of credit conditions, currently underway, could play a role. “You cannot continue this path indefinitely.”

Among the signs of a possible revision is Amazon’s decision to sublet or renegotiate rents for warehouses over 2.7 million square meters.

Ward Fitzgerald, chief executive of EQT Exeter, an EQT affiliate, warned in the Wall Street Journal, “You will see a decline in demand and an increase in rents at this rate.”

The “question”, according to Michael Shipper, is “how much and for how long. No one has the answer.”

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