3.10.2017

The supply chain renaissance being driven by e-commerce continues to push retailers, wholesalers and third-party logistics companies into newer and larger fulfillment centers in core markets throughout North America. In 2016, robust demand created record levels of development, which is now in equilibrium with absorption and providing a healthy amount of options for occupiers. In 2017, robust development will likely keep vacant inventory in line with the current rate, which will, in turn, slow the growth of effective rents for the foreseeable future and provide prospective tenants with more options at a stabilized cost. On the heels of the all-time-low 5.3% capitalization rate (cap rate) in 2016, we expect low cap rates to continue in 2017 thanks to the popularity of industrial big-box product with domestic and international investors.  
With key demand drivers intact, we expect that strong big-box fundamentals will continue in 2017. It’s clear that e-commerce will endure as a driving force of the industrial real estate market for years to come. Yet in many ways, such as supply chain management, e-commerce is still in its infancy and there is still plenty of room for even greater impact on the industrial market.