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Secondary Logistics Markets Poised for Growth

New CBRE Group report says companies seek to expand supply chain coverage, with average rents exceeding pre-recession levels, thus setting the table for development.

A new report from CBRE Group, Inc. says secondary warehouse and distribution center markets such as Denver, Detroit and Portland are poised for growth as the push to build out and modernize supply chains enters its next phase.

CBRE says, “Most development of warehouses in the U.S. since 2011 has occurred in primary industrial markets such as Atlanta, Chicago and Greater Los Angeles. Those 13 primary markets saw a 30% increase in average rental rates and a decline to 4.9% vacancy in that span.

“In contrast, secondary industrial markets in the U.S. now are in better position than primary markets to absorb growth. Average rents in 17 U.S. secondary markets have increased by only 13% since 2011. But developers should be encouraged that the average rent in those markets have pushed past their pre-recession levels. In addition, vacancy in those secondary markets stands at 6%, and it still is steadily declining.

David Egan, CBRE Americas Head of Industrial & Logistics Research, explains, “As infrastructure for e-commerce fulfillment expands, the industry will seek to expand its real estate footprint in secondary markets to better cover a larger portion of population centers and increase delivery speeds. As this unfolds, second-tier industrial markets like Cincinnati, Louisville, Charlotte and others offer ideal market fundamentals for developers and e-commerce companies looking to expand their supply chains.”

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