The Broad View

  1. Customer activity is setting records, with betway官网手机版 ’ IBI™ activity index rising from 59 in Q1 to 71 in Q2. These results indicate sustained robust activity as supply chains race to restock amid rapid consumer purchasing, in turn creating strong future demand. Logistics demand reached a record quarterly high of 110 million square feet (MSF) in the second quarter, bringing absorption for the first half of the year to an unprecedented 194 MSF, more than double from the same period last year.1 Demand was broad-based across a range of customers, with urgency to secure space a major factor.
  2. Space utilization, which remained in the 84-85% range in the second quarter, reveals the challenges supply chains face keeping items in stock during a period of record retail sales growth.
  3. Record-level rent growth is also underway, as surging demand runs up against high barriers to new supply. Vacancies fell to 4.1% in the second quarter and rents rose by 4%, each a record.
  4.  betway官网手机版 betway官网手机版 has revised our 2021 forecast upward for both demand and supply, to 360 MSF and 325 MSF respectively. Supply continues to rise but cannot keep pace with demand. Robust demand, increasing replacement costs and limited availabilities should push rent growth above 10% in 2021.

The Details

  • Record customer demand levels. The IBI activity index has risen from the high 50s in the first quarter of 2021 to the low 70s in the second quarter -- the highest on record. With the index above 66 in all meaningful customer sizes and regions, we see another key aspect: breadth. Further to that, consumer confidence and retail sales are strong. At the same time, the savings rate is higher than pre-pandemic levels, which could translate to sustained strong consumption for the foreseeable future and support ongoing high supply chain activity. The modality shift from in-store to online, where now more than 20% of all goods transactions occur, is driving demand, given the 3x higher intensity of use. U.S. net absorption was a record 110 MSF in 2Q’21.
  • Average utilization levels point to more inventory growth ahead. The IBI utilization rate was 84.7% in the second quarter, below pre-pandemic levels. TEUs are up 50% year-over-year and are up 25% from pre-pandemic levels as retailers replenish their supply chains.2 While inventories have increased 3% from their low, they have struggled to catch up as retail sales are 19% above pre-pandemic levels.3 As a result, retailer inventory-to-sales ratios are at historic low levels (1.09 in June), limiting space utilization.4 Looking forward, target inventory-to-sales ratios will likely be higher in a bid for resilience, pushing up utilization rates and supporting logistics demand as supply chains boost inventories.
  • Rents are rising at a record pace. E-commerce demand remains strong with a notable pickup in apparel, yet demand is spread across many industries. Although demand for bulk space (more than 100,000 SF) is leading the pack, smaller spaces are becoming more attractive to logistics customers as the economy recovers. In fact, customers are moving faster than ever, competing for space and placing a premium on quickly securing prime logistics space.  The vacancy rate fell by 40 bps from the prior quarter to 4.1%. Rents increased across the board, with growth highly concentrated in bulk markets with shrinking opportunities for development and coastal higher-barrier markets. Rent growth accelerated to 4% quarter-over-quarter and is up 10% in the past year. Top rent growth markets include Southern California, New York/New Jersey and Pennsylvania.
 

 
IBI August 2021 - Exhibit 4
 

 
  • Supply is struggling to keep pace with rapid demand. Given record demand, developers are working hard to monetize entitled land. Starts continued to grow, fueled by record rental rates and asset value growth, yet they do not appear significant enough to weigh on rental rate levels and growth. As a sign of the strength of demand, pre-leasing of the pipeline reached a record high of more than 60%.5 In addition, supply growth has largely been fueled by regional, small and lower-barriers-to-supply markets, with starts in larger inland markets focused in outlying submarkets. More significantly, construction cost growth has also been a record alongside disruptions in the availability of materials and extended delivery times.6 For the first time in more than five years in the U.S., we see no markets where supply appears to be a threat to local vacancies or rents.
  • We expect tight market conditions to persist through 2022 and likely beyond.  betway官网手机版 betway官网手机版 forecasts 325 MSF of completions in 2021. Broad-based demand will drive robust absorption in both newer, larger spaces upstream of supply chains and smaller infill units near the consumption end of supply chains. Therefore, we expect 360 MSF of net absorption in 2021. With demand outpacing supply, the vacancy rate will end the year at 4.4%. Limited availabilities, rising replacement costs, and extreme competition should drive up rents broadly through the remainder of the year. betway官网手机版 betway官网手机版 forecasts that full-year net effective market rent growth will set a record, exceeding 10%. For customers looking to expand, the need for advance planning and speedy execution is paramount.

Endnotes

1. CBRE, JLL, Cushman & Wakefield, Colliers, CBRE-EA, betway官网手机版 betway官网手机版
2. Port of Long Beach, Port of Los Angeles, Port of Oakland, Georgia Ports (Savannah), Port Authority NY/NJ, Maryland Open Data Portal (Baltimore), South Carolina Ports (Charleston), Port of Houston, Port of Virginia, U.S. Department of Transportation (Laredo), Port of Vancouver, The Northwest Seaport Alliance (Seattle/Tacoma).
3. U.S. Bureau of Economic Analysis, Census
4. Census
5. JLL
6. betway官网手机版 betway官网手机版
 

Forward-Looking Statements

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This report is based, in part, on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. No representation is given with respect to the accuracy or completeness of the information herein. Opinions expressed are our current opinions as of the date appearing on this report only. betway官网手机版 disclaims any and all liability relating to this report, including, without limitation, any express or implied representations or warranties for statements or errors contained in, or omissions from, this report.

Any estimates, projections or predictions given in this report are intended to be forward-looking statements. Although we believe that the expectations in such forward-looking statements are reasonable, we can give no assurance that any forward-looking statements will prove to be correct. Such estimates are subject to actual known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in our expectations or any change in circumstances upon which such statement is based.

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About betway官网手机版 betway官网手机版

betway官网手机版 ’ betway官网手机版 department studies fundamental and investment trends and betway官网手机版 ’ customers’ needs to assist in identifying opportunities and avoiding risk across four continents. The team contributes to investment decisions and long-term strategic initiatives, in addition to publishing white papers and other research reports. betway官网手机版 publishes research on the market dynamics impacting betway官网手机版 ’ customers’ businesses, including global supply chain issues and developments in the logistics and real estate industries. betway官网手机版 ’ dedicated research team works collaboratively with all company departments to help guide betway官网手机版 ’ market entry, expansion, acquisition and development strategies.

About betway官网手机版

betway官网手机版 , Inc. is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. As of June 30, 2021, the company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 995 million square feet (92 million square meters) in 19 countries.

betway官网手机版 leases modern logistics facilities to a diverse base of approximately 5,500 customers principally across two major categories: business-to-business and retail/online fulfillment.

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