By Seda Preston | Associate Director Industrial Services, Colliers
There is an adage in real estate that the three key features are location, location and location.
That resonates acutely for industrial logistics real estate. Locally we say Jacksonville is America’s Logistics Center, which means Jacksonville boasts the four pillars of logistics infrastructure: road, rail, sea and air.
Industrial distribution centers and e-commerce fulfillment centers, also known as logistics real estate, also should be considered among those pillars.
Over the last couple of years, we have all heard about supply chain disruptions. The closer your product is to its destination, the more accurately you can predict its on-time arrival, which has become exceptionally important in our consumer-driven, on-demand economy.
Logistics drives the industrial real estate sector, where the focus is on how long the product takes to reach the customer, and which is why logistics infrastructure is so important in determining the location of industrial real estate.
An example of the direct correlation between transportation logistics and logistics real estate is found in JaxPort’s initiative to target new container shipping lines to call on the port.
The goods in these containers must have somewhere to go, so it is essential to have available logistics real estate options to attract these companies.
Considering Jacksonville’s location, which is positioned to reach 30% of the U.S. population within an eight-hour truck drive; the rail service offered via Norfolk Southern, CSX and Florida East Coast Railway; the available capacity at JaxPort; plus the continued migration of corporations and population to the Southeast, it makes sense that the demand for logistics real estate is greater than we have ever experienced in our market.
The vacancy rate today stands at less than 1% for functional, industrial product, which is low for a healthy market, where a vacancy rate about 5% is ideal.
Fortunately, we are tracking more than 10 million square feet of new industrial product scheduled to deliver between now and 2024. That may seem high, but a market must have big-box industrial spec buildings readily available to attract new industrial users and to allow for movement of existing users.
Additionally, with 2 million square feet already spoken for, we anticipate that much of the balance of the product under construction will be pre-leased and a healthy vacancy rate will remain.
With the shortage of available industrial facilities, there is growing demand for industrial outdoor storage or IOS facilities. These are open yards that are leased by the acre and allow for storage of containers and equipment.
Typically located near intermodal yards or seaports and allowing for rapid conveyance of cargo from one form of transport to another, IOS facilities directly support transportation logistics.
The current headwinds, such as inflation, increased interest rates and talk of recession inevitably will reduce consumption.
Because everything we consume moves through some form of industrial facility, we do expect to see a moderating effect on the demand for industrial space.
However, in Northeast Florida, we are observing great demand for logistics real estate, led by our business-friendly climate, strong labor force, growing population and our superior logistics infrastructure, which we anticipate will serve to insulate our market from a significant downturn.
Colliers Associate Director Industrial Services Seda Preston began her career as an Industrial Specialist In 2016.