3PLs Propel Industrial Rents Sky-High Near Oakland Airport
Pressure from the e-commerce explosion over the past year pushed industrial rent premiums for properties near Oakland International Airport to 32% above market average between January 2020 and February 2021, according to a CBRE MarketFlash report.
The data point is part of a larger picture of booming industrial growth, with North America’s industrial and logistics market having the strongest year on record in 2020, according to CBRE’s Industrial Big Box report. One main feature behind the expansion is that consumers want speedier online order deliveries, making submarkets near major cargo airports prime locations.
“As e-commerce distribution and fulfillment networks continue to evolve, proximity near vital transportation arteries such as airports, highways and ports will continue to be the most important factor in corporate site selection,” CBRE Oakland Industrial & Logistics Vice President Kevin Hatcher said in a statement. “In addition, locations that can offer low site coverage for ever-increasing parking needs for employee cars, delivery vans and trailers are highly desirable. The Oakland Airport industrial submarket offers all those key features along with immediate access to a dynamic consumer population and abundant local labor force.”
Of the 11 major airport submarkets tracked by the report, Oakland experienced the second-highest rent premium next to the Chicago O’Hare International Airport submarket, which grew by 47.1%.
While a medley of industrial users craves a slice of the airport submarket pie, the biggest occupiers of these areas in 2020 were third-party logistics, or 3PL, companies at a 29.6% share, followed by retail and wholesale at 24.4% and e-commerce at 16%.
For industrial space in North America as a whole, e-commerce users occupied the largest share at 27.1%, with 3PLs trailing just behind at 25.8%, according to CBRE’s report.
E-commerce users currently tend to lease larger facilities than 3PLs. However, with 3PLs increasingly outsourced to provide more e-commerce services, the picture could shift with 3PLs potentially occupying the greatest share of industrial space in 2021, according to CBRE Global Industrial Research Head James Breeze, who spoke at a March 22 CBRE press briefing on big-box industrial.
"I would say the trend to look out for in 2021 is that increased demand for 3PLs,” Breeze said. “They're going to start leasing larger facilities because they're being hired by companies at a greater clip to handle e-commerce distribution and hold and distribute those increased inventories onshore.”