A dramatic uptick in shipping costs is driving demand for industrial space near well-placed ports, leading many companies to pay a premium for distribution facilities in strategic locations.

“This trend is most pronounced in the mammoth port markets of Southern California and Northern New Jersey,” says Mark Russo, director and head of industrial research at Savills, noting that average asking rents for warehouses within 5 to 10 miles of those “regions run between 41% and 63% higher than in outlying areas 40 to 60 miles away. But, paying a premium for facilities in strategic locations often makes sense, given that transportation can make up 50% of total occupier costs, while real estate often comprises less than 10%.”

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