LOS ANGELES—With only two markets represented in the global top 10, and at the lower end of the rankings at that, the US logistics sector does not lead the world in terms of high rents. Where it is dominant is year-over-year rent growth, according to CBRE's latest survey of prime rents in the world's industrial and logistics markets.

CBRE says five of the top 10 fastest-growing logistics markets are in the US, “cities that have undoubtedly benefited from strong demographics and significantly impacted by e-commerce and a transformation in their supply chains.” Leading the list is Seattle with 16.9% annual increases in prime rents at the end of the first quarter. That's a sharp contrast to the 4.9% Y-O-Y growth measured there in last year's survey.

Across the US is the world's second-fastest growing market in terms of logistics rents, the I-78/I-81 Corridor in Pennsylvania, which experienced 10% increases over Q1 2016 levels. Both the Seattle and Pennsylvania markets, CBRE says, are “emblematic of the growing demand for logistics space.”

Seattle's spike in Y-O-Y rent growth was due largely to supply constraints and lack of available logistics space, CBRE says. In the I-78/81 Corridor, “new facilities are commanding premium rents from e-commerce, logistics and consumer-goods users.”

Other US markets in the top 10 include Oakland, CA—at 9.4% Y-O-Y growth, seated for fourth place between the UK markets of Leeds/Sheffield (9.5%) and Manchester/Liverpool (9.3%)—and sixth-ranked Los Angeles/Orange County, CA and seventh-place Atlanta, each with 9.2%. Rounding out the global top 10 are three Chinese markets: Suzhou (8.7% Y-O-Y growth), Hangzhou (7.4%) and Ningbo (7.2%).

One notable slowdown in prime rent growth domestically occurred in New Jersey, where prime rents actually declined by 3.1% between Q1 '16 and Q1 of this year. The decline was due mainly to limited transactional activity in prime logistics facilities. However, this trend is expected to reverse for the second half of 2017, with 3% forecasted growth, according to CBRE.

Also expected to reverse in the second half of the year is the sluggish GDP growth seen in Q1 of this year. “Surveys suggest a strong bounceback in Q2 and growth rate of around 2.1% in 2017, possibly higher,” according to CBRE. “The Trump administration has laid out a very ambitious infrastructure plan totaling $1 trillion, which is expected to boost the US economy and the logistics sector in particular.”

Even before that plan goes into effect, though, there's still the explosive trend of last-mile logistics to drive growth. Domestically, says CBRE, “light-distribution facilities located near or within major metros are growing more popular to meet consumer demand for same- and next-day delivery of goods. Rents in this segment have increased significantly in some areas, especially in infill submarkets that are well positioned to serve the urban core.”

Conversely, while the Americas lead the world in terms of Y-O-Y rent growth—3.8% across the region, compared to 2.25 globally—they lag Asia Pacific for high rents. The world's most expensive logistics market is Hong Kong at $32.40 per square foot, and the only two American entrants in the top 10, Oakland (#9) and L.A./Orange County (#10), are nearly 75% cheaper on a per-square-foot basis.

However, balancing out the dominance of Asia Pacific in high rents is its third-place ranking for rent growth. At 1.4% Y-O-Y, the region's rents are growing at less than half the pace of those in the Americas.

Instant Insights /

US Logistics Leads in Prime Rent Growth

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