Photo of Adam Mullen In some hot markets, we’ve reached the unusual stage of net absorption slowing because there simply aren’t enough available properties,” says Adam Mullen at CBRE.

ATLANTA—In a commercial real estate variation on Yogi Berra’s famous quip, “that place is so crowded, nobody goes there anymore,” net absorption has begun to decelerate in some industrial corridors. Yet the reason is not lack of demand, but lack of product.

“The Industrial market, particularly in the US, is different from many other commercial real estate categories because the growth of e-commerce has triggered a permanent, structural change in demand for these properties,” says Adam Mullen, Atlanta-based senior managing director and Americas leader, industrial & logistics at CBRE. “In some hot markets, we’ve reached the unusual stage of net absorption slowing because there simply aren’t enough available properties to sustain it.”

In such circumstances, CBRE says in its industrial outlook report for the year, the challenge is clear: “A lack of quality choices in most markets has put users seeking to expand their supply chains in a difficult spot. While record-level rents are a concern, the compromises tenants must make on location decisions—either at the market or submarket level— are the real issue. These decisions can have a profound impact on overall supply chain costs, which are heavily influenced by transportation (both inbound and outbound) and labor costs.”

These compromises by individual tenants don’t appear to have put a dent in fundamentals overall, though. Although demand for space has slowed a little from the above-average pace maintained between 2013 and 2016—and the fourth quarter of 2017 saw demand lag new supply—last year’s quarterly average net absorption of 52.9 million square feet is on par with the quarterly average over the cycle that began in 2010.

Moreover, net absorption for calendar ’17 exceeded 200 million square feet for the fifth year in a row. The five-year average of 256.9 million square feet is the highest since CBRE began tracking this statistic in 1989.

“Consistent demand for all types of warehouse space, steadily declining availability and a steady rise in rents have been this cycle’s hallmarks,” says CBRE. This has resulted in some impressive milestones: 30 consecutive quarters of positive net absorption, availability at its lowest since 2001 and 24 consecutive quarters of rent growth. Asking rents reached an all-time high in Q3 2016 and have set a new record in each subsequent quarter, with year-over-rent rent growth of 5.3% at the end of Q4.

Underpinning these consistent gains in asking rents were the secure positions of the sector’s two major demand drivers, namely consumer consumption and manufacturing. As ’17 ended, US unemployment was at a 17-year low of 4.1%, while consumer confidence reached its highest level in 13 years. “With rising consumption, industrial production reached the highest point on record in December,” says CBRE.

Longer term, CBRE sees several development trends starting to take root this year. Among them is developer interest in constructing multistory warehouses in select urban submarkets with few available properties, high land prices and rising lease rates.

Eventually, says CBRE, “factors such as automation and driverless trucks will influence industrial site selection, perhaps allowing for distribution centers to be built farther outside of population centers. But that phenomenon is more of a long-term factor.”