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Will Warehouses Outpace Office Buildings as Investments?

DealStreetAsia.com has a good look at the growth of warehouses as real estate investments, With e-commerce booming, warehouses are now worth more than office buildings.

Colliers looked at 14 North American markets (all but one, Toronto, in the U.S.) and found that such warehouses sold last year at an average capitalization rate of 5.8 percent. That’s comfortably lower than the 6.7 percent cap rate for U.S. office space, including suburban and rural properties, and neck and neck with offices in central business districts, at 5.7 percent. Cap rates, which measure yield, fall as asset values rise.

These are not the sleepy warehouses of old. Distribution centers today are hives of activity.

As e-commerce companies race to get….those packages…to your doorstep ever faster, they need sophisticated equipment to assemble orders and a swelling workforce to manage it all.

The report itself didn’t look at office properties, and markets dominated by offices aren’t always the same as major industrial markets. Still, the rise of the warehouse’s value is unmistakable nationwide, said Pete Quinn, national director of industrial services for the U.S. at Colliers.

Vacancy rates are at “historic lows,” Quinn said, and despite a lot of construction, warehouses are being leased as soon as the cranes come down.

 

For those looking to make value-add investments in warehouses across the Philadelphia area, this could be a great opportunity.