Major market industrial land values have seen a respectable uptick, thanks to a surge in warehouse and distribution center development. For the Chicago market, this means a 16 percent price increase, according to a new report from CBRE.
The average price for large industrial parcels of 50 to 100 acres—usually earmarked for the construction of large, regional warehouses—doubled over the last year, to more than $100,000 per acre from roughly $50,000. Smaller parcels between five to 10 acres, suitable for infill distribution centers in urban or suburban settings, also increased to more than $250,000 per acre, up from around $200,000 a year ago.
“Overall demand for industrial land remains strong and it is especially high in infill markets,” said Matt Ishikawa, senior vice president in CBRE’s Land Services Group. “Developers have been very active in the Chicago area with both built-to-suit and speculative industrial projects and this activity is not slowing down heading into 2018. Demand is so strong for industrial sites that buyers are looking beyond just green fields and are also seeking teardown and redevelopment opportunities.”
In many cases, the markets that registered substantial gains in land prices also saw increases in average asking rents.
“Escalating land prices are a big reason why new supply of U.S. warehouses and distribution centers hasn’t kept pace with strong demand in recent years,” said David Egan, CBRE Global Head of Industrial & Logistics Research. “This situation won’t go away any time soon, because the markets where distribution centers are most in demand – typically near or in densely populated city centers – have scant available land for industrial uses.”