The cost of renting a warehouse in the United States has skyrocketed in the past two years, while vacancy has plummeted to record lows. A booming e-commerce sector, reshoring manufacturers, and other contributing factors have kept pushing demand higher. Meanwhile, a global pandemic, unprecedented supply chain disruptions, and a labor shortage have limited the ability of industrial real estate stakeholders to deliver new inventory.
As businesses outgrow their existing facilities, they are now left wondering: Can I afford a bigger warehouse? Fortunately, there are still some distinct markets around the country where savvy warehouse hunters can still find viable facilities.
Who Still Has Warehouse Vacancy?
Though warehouse availability is tight everywhere in the U.S., finding warehouse space in certain areas seems nearly impossible. For example, the Inland Empire region of Southern California has a 0.4% vacancy rate for industrial real estate. Similarly, defense markets—such as Norfolk, Virginia—have less than 1% vacancy. Similarly, places like Kentucky and eastern Tennessee now have low vacancy due to their proximity to the Eastern seaboard. As a result, the low vacancy in these areas has driven asking rents up.
Pockets of affordable industrial real estate do still exist, however. Here are some geographic locations where you can still find affordable warehouse space.
1. Western Pennsylvania
When you consider that warehouse rents in Los Angeles have climbed by nearly 25% year-over-year, Pittsburgh’s modest 3.5% rent hikes don’t look so bad. In addition, Pittsburgh features an international airport, ever-increasing access to major interstates, updated rail infrastructure, and a strategic location roughly halfway between Chicago and New York City. With these benefits, Pittsburgh and other Western Pennsylvania population centers make excellent locations for fulfillment centers and other types of warehouses. Best of all, Pittsburgh’s 5.6% industrial vacancy rate means that the location has more warehouses than the national average.
Though the ports in Atlanta and Savannah keep the warehouse vacancy rate pretty low in those areas, much of Georgia still has affordable warehouse space available. Unfortunately, it can be challenging to estimate the exact vacancy rate in rural Georgia, given that Atlanta and Savannah heavily skew the average for the state. However, even though secondary markets may not be top of mind for warehouse hunters, a Georgia warehouse provides reliable access to Florida, the Southeastern U.S., and points north on the East Coast.
3. North Carolina
North Carolina has been an up-and-comer for industrial real estate in recent years, especially in the Charlotte region. However, the state offers a variety of opportunities for warehouses. Asking rents in Charlotte have increased 5.5% year-over-year, landing around $5.63 per square foot. Industrial properties outside the state’s metro areas can likely be found even cheaper.
Furthermore, North Carolina offers a variety of incentives that can help offset costs associated with a new warehouse. For example, the state has the lowest corporate tax in the United States at 2.5% and offers a variety of incentives for companies willing to locate a facility in the state.
Warehouses in the Chicago metro area are few and far between. However, a careful examination of the rest of Illinois will reveal opportunities for a centrally located national or regional distribution center in one of the state’s many smaller cities. For example, travel two hours outside of Chicago to the Bloomington-Normal region, and you still gain benefits such as:
- Easy access to I-39, I-55, and I-74
- Short travel times to Chicago, St. Louis, and Indianapolis
- A skilled workforce
Perhaps most importantly—you can lease or buy a warehouse for much lower rates than you would pay in Chicago.
About Phoenix Investors
Founded by Frank P. Crivello in 1994, Phoenix Investors and its affiliates (collectively “Phoenix”) are a leader in the acquisition, development, renovation, and repositioning of industrial facilities throughout the United States. Utilizing a disciplined investment approach and successful partnerships with institutional capital sources, corporations and public stakeholders, Phoenix has developed a proven track record of generating superior risk adjusted returns, while providing cost-efficient lease rates for its growing portfolio of national tenants. Its efforts inspire and drive the transformation and reinvigoration of the economic engines in the communities it serves. Phoenix continues to be defined by thoughtful relationships, sophisticated investment tools, cost efficient solutions, and a reputation for success.