During the last 10 years, both retail and industrial rents have risen. But how much they’ve risen tells the tale of just how in demand one of these sectors is.
JLL in early May released its latest U.S. Industrial Snapshot. This report showed how the spread between retail and industrial rents in the United States has steadily shrunk during the last 10 years.
According to JLL, from 2011 to 2021, retail rents grew 19.6 percent. Those are solid numbers. But during the same time period, industrial rents grew by a far more impressive 57.1 percent. This big jump in industrial rents has caused the gap between average retail and industrial rents to shrink.
As JLL sums up, during the past decade, industrial rents grew by nearly 40 percentage points more than did retail rents. And don’t expect this trend to slow in the coming years.
JLL predicts that industrial rents will continue to grow at a faster pace than will retail as more new industrial space hits the U.S. market and is quickly leased up. The lower vacancy rates that will become common in the industrial market will create a competitive leasing environment, too. JLL says that the two factors of newer supply and increasing leasing competition will result in steady increases in industrial rents during the next several years.
Another factor? Ecommerce sales.
JLL says that ecommerce sales have represented 15 percent of total retail sales so far in 2021. That is an all-time high, rising from under 6 percent in 2011. In 2019, ecommerce sales accounted for 10.9 percent of all retail sales.
As the demand for ecommerce continues to rise, companies will need more distribution space located closer to their consumers. As JLL says, this will also fuel the continuing rise of industrial rents.
