Investors Eye Warehouse Sector

Investors continue to be optimistic about the U.S. warehouse sector, according to the PwC 1Q12 Real Estate Investor Survey. Steady demand, coupled with a dearth of new product, is expected to push vacancy rates down and drive up rents in many markets, particularly coastal port cities. National warehouse rents increased 26 basis points during 1Q12, with an average change of 1.46 percent.

The spike in demand has also affected tenant retention, which rose to 64.8 percent in 1Q12, as well as rent concessions. Only one year ago, some landlords were providing up to 12 months of free rent on a 10-year warehouse lease. In 1Q12, the high end of the range is nine months. The high end of the range was six months during the market peak in mid-2007.

Overall capitalization rates for U.S. warehouses ranged from 6.0 percent to 12.0 percent in 1Q12, with the average falling seven bps to 7.41 percent. And while 57.1 percent of survey respondents said that market conditions favor neither buyers nor sellers, 28.6 percent said that market conditions favor buyers, up from last quarter.

Source:  CCIM


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