Land-Locked Warehouses Lead Overachievers

As the vacancy rate for distribution facilities edged up nationwide in 2008, one category beat the long odds. Almost all the locations that trimmed warehouse vacancy were hundreds or thousands of miles removed from the nation’s struggling coastal ports.Inland markets were the surprise standouts during a year when the national warehouse rate rose from 7.9 percent at the end of 2007 to 9.1 percent during the fourth quarter. Of the 54 major warehouse markets surveyed by Colliers International, 12 reduced vacancy last year. Detroit cut vacancy from 13.2 percent to 11.5 percent, Minneapolis vacancy dropped 60 basis points to 10.4 percent and Memphis shaved its rate 27 basis points to 11.9 percent. Among the other mostly Midwestern markets that lowered vacancy were Cleveland, Kansas City, Little Rock, Louisville and St. Louis.Only three coastal markets managed to move vacancy downward in 2008: Seattle and Portland, Ore., on the Pacific Coast and Hartford on the Atlantic. Vacancy crept upward in all other coastal markets. Atlanta edged up 110 basis points to 12.6 percent and Northern New Jersey from 6.1 to 6.4 percent. Even in the nation’s tightest distribution market, Los Angeles, vacancy eased by 90 basis points to end the year at 3.8 percent. Nor did every market in the nation’s central regions thrive in 2008. Chicago’s vacancy rate ticked up 170 basis points to 10.3 percent and Denver’s from 6.6 percent to 8.2 percent.Colliers International executive vice president & director of market and economic research Ross Moore speculated that a handful of non-coastal warehouse markets may continue to outperform their competitors in 2009. The recent swing in energy prices may benefit manufacturers in the United States by demonstrating that ordering goods from presumably lower-cost markets like Asia still involves unpredictable transportation costs, he noted. That may prompt some U.S. companies to step up orders from domestic manufacturers, which would help demand for distribution space in some Midwestern markets.