Direct vacancy and availability increased in every port market studied.
The Covid epidemic with the rush to import and export freight through major U.S. deepwater ports produced a wave of investment in the construction of new distribution and warehouse facilities nearby. That has led to excess capacity as trade flow has rebalanced, with increasing vacancy and tepid rent growth leading to a slowdown in new construction, according to a new report from Cresa, a CRE tenant advisory firm.
"2024 rent growth is on pace to register the slowest growth since 2012," the report said. Overbuilding and its effect on rents may create opportunities for tenants to negotiate rates, especially for early renewals.
The lease spread between the port and non-port markets has increased, with non-port cities and lease rates growing 7.4% a year since 2014, while port cities have seen 7.8% annual increases. "The compounded annual growth rate (CAGR) for asking lease rates since 2014 for both port and non-port markets is significantly higher than the past year, which shows that the market is slowing. Still, many of the port markets outpaced non-port markets in asking lease growth rate for the past year," the report stated.