GDP growth forecast (% Annual)
Global economy is expected to enter a recession in 2023.
– Moderate growth will return by Q4 2023.
– Industrial real estate is not recession-proof, but drivers remain to provide some insulation during the downturn.
Source: CBRE House View, November 2022 Forecast.
CPI forecast (Annual average)
Most see spike in 2022 followed by a drop in 2023
HIGHER BUT NOT EXCESSIVE INFLATION IN 2022
SPIKE IN 2022 FOLLOWED BY MORE MODERATE INFLATION IN 2023
Source: CBRE House View, November 2022.
– Accelerating growth in e-commerce requires retailers to augment delivery capacity
Economic growth and urbanization support demand in emerging markets
Occupiers seek to expand and upgrade to modern facilities to enhance storage efficiency and install tech, especially automation
– Growing demand for facilities located near points of consumption
– Localization of production
– Diversification of sourcing
–
Third party logistics (3PL)
– Retailer
– Cold storage
– Post and parcels
Source: CBRE Supply Chain, November 2022.
SUPPLY CHAIN Global container freight pricing index Weekly Prices (USD)
12,000
10,000
8,000
6,000
4,000
2,000
$1,828
Suez Canal Blockage
Yantian, Shenzhen Port Closure
Russia-Ukraine Conflict
$11,109 $3,446 0
Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22
Note: Global Container Freight Index represents the market rate for 40’ containers shipping fee (FEUs).
Source: fbx.Freightos.com, October 2022.
Cass freight index on expenditures up 21% year-over-year through September but rate of growth is declining.
120%
100%
80%
60%
Year-Over-Year Growth 2-year Stacked
40%
20%
0%
-20%
21.2%
60.6% -40%
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22
Source: Cass Freight Index on Expenditures, September 2022.
SUPPLY CHAIN Global schedule reliability
(% of ocean liners arriving on schedule)
year
100%
80%
60%
40%
20%
0%
Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22
Source:: Sea-intelligence, October 2022
Annual cost increase to ship a 40-ft container from Shanghai to Los Angeles
Average year over year increases in domestic freight costs. Includes all domestic transportation modes (truck, rail, air) .
Source: Cass Information Systems Inc, Oct 2022.
2021 year over year asking rent growth was an all time record.
Source: CBRE Research, Q3 2022.
Compares the U.S. hourly wage increases for a non supervisory warehouse worker from Q1 2021 with Q1 2022.
Source: CBRE Labor Analytics.
Source: Drewry Container Port Index, Oct 2022
Historical price inflation for key construction commodities (Index 1982=100)
Typical lead times as of Q3 2022
Lumber and wood Iron and steel Concrete products All commodities Gasoline
Typical lead times as of Q3 2022
Material
Current Lead Time Delta to Pre-Covid
Concrete 2 3 weeks +150%
Steel beams & decking 10 14 weeks +75%
Drywall & metal studs 14-16 weeks +600%
Lighting & controls 16 20 weeks +100%
Wood doors & frames 18 20 weeks +233%
Open web joists 12 20 weeks +50%
Appliances 20 30 weeks +400%
Aluminum glazing 30 36 weeks +433%
Roofing membranes 24 36 weeks +750%
HVAC equipment 36 52 weeks +267%
Roofing insulation 40 52 weeks +667%
Sources: Bureau of Labor Statistics; CBRE Strategic Investment Consulting; CBRE Cost Consultancy, August 2022.
All markets saw an acceleration of e-commerce sales during the pandemic
10% 20% 30% 40% 50% 60%
0%
Lowest possible score
CBRE -commerce Drivers Index: How Prepared is a Market to Support Ecommerce?
South Africa India Vietnam Philippines Romania Thailand Mexico Croatia Malaysia Poland Turkey Hungary Brazil Slovakia Lithuania Russia UAE Slovenia Latvia Austria Greece Portugal Taiwan Estonia Czech Republic Spain Ireland Italy Hong Kong SAR France Australia Indonesia Switzerland Japan Belgium Canada Finland Norway New Zealand Sweden Netherlands Denmark South Korea Singapore Germany United States United Kingdom Mainland China
Sources: CBRE Global E-commerce Outlook; CBRE Research, April 2022.
Internet sales as a % of total retail sales
Despite a slowdown due to stores reopening and revenge spending, e-commerce will return to growing ratios, having accelerated 4 5 years during the pandemic.
E commerce penetration will continue to grow in established markets
Lower-growth levels in the market with weaker presence of e commerce drivers although these markets are also developing
Sources: CBRE Global E-commerce Outlook; CBRE Research, April 2022.
RETAIL & E-COMMERCE
0 2 4 6 8 10 12 14 16
Brazil Canada Czech Republic
Slovakia South Korea
Mainland China Tier 1
Spain Sweden
Australia Belgium
USA
France Germany Hong Kong SAR Italy Japan
Thailand United Kingdom 18 0
Sources: CBRE Global E-commerce Outlook; CBRE Research, April 2022.
Americas and APAC
Share of Investment by Property Type (Trailing 12 Months, Floating FX)
Source: Real Capital Analytics; CBRE Research, Q3 2022
– Industrial investment volume in the Americas fell by 28% year over year in Q3 to $33 billion. There is still strong demand from occupiers.
– Industrial investment in Europe fell by 5% Y o Y in Q3 to US$15 billion. This was the smallest Y o Y decrease in the region across the main commercial real estate sectors.
– Industrial investment volume in APAC plunged 47% Y o Y in Q3 to US$4 billion. This large drop was somewhat amplified by historically high volume in the sector last year.
Source: CBRE Research, Q3 2022
INVESTMENT MARKET Composite yields by property type % Source: CBRE Research, Q3 2022
– E commerce will continue its slow, steady growth as a % of overall retail as consumer expectations further justify next day and same day delivery.
Having the right inventory in the right locations, whether it be the retailers, suppliers or outsourced 3PLs, will be key to meeting consumer demand.
Automation will be utilized at a greater clip to tackle labor challenges that firms may be budgeting in/evaluating to improve their operations.
Population growth and logistics hubs will drive demand in emerging markets.
– Greater visibility and emphasis into labor dynamics and transportation infrastructure will drive intelligent site selection.
Exploration of energy resources and evaluating reliability, efficiency and capability to provide improved environmental outcomes.
U.S. Europe APAC Source: Asia Pacific Logistics Occupier Survey (Sep 2021) and European Logistics Occupier Survey (May 2022), U.S. Occupier Survey (Nov 2022), CBRE Research.
Increased demand from industrial occupiers, combined with an extremely tight job market, will lead to the expansion of automated technology and robotics. Since automation will require building amenities found primarily in newly constructed facilities, this will increase the demand for first-generation facilities in 2022 and beyond. According to CBRE European Logistics Occupier Survey 2022, logistics facility design is increasingly crucial for building selection in order to accommodate automation and improve productivity.
Given the need to reduce carbon emissions, the industrial sector will face more regulatory pressure, particularly for energy efficiency. While much of this effort will likely be focused on improving passenger and freight transportation efficiency and reducing manufacturing emissions, warehousing may be impacted as well. Consequently, developers may use more sustainable construction materials like timber instead of concrete and steel.
Robust demand led to 448.2 million sq. ft. of net absorption year to date in the U.S., Canada and Mexico, 27% higher than the same period last year. Construction completions totaled 354.7 million sq. ft., 56.3% higher than this same time period last year. Companies continue to lease space to account for continued e commerce sales growth, supply chain diversification, inventory control and population shifts. Overall vacancy decreased by 10 basis points (bps) to a historic low of 2.1%.
The average asking rent in the U.S. climbed to $9.54 per sq. ft., a year over year increase of 12.8%. Canada and Mexico saw rents rise year over year by 28.5% and 8.1%, respectively. Rental rate growth is expected to stay in the double digits in the U.S. well into 2023.
Total investment sale volume between January through September of this year slightly increased by 0.6% in the entire region, year over year. The U.S. witnessed a Y o Y rise of 25.2% in sale volume, reporting just over 99.1 billion in industrial investment deals year-to-date. A softening of activity is predicted as rising interest rates continue against a weaker economic backdrop as lending standards tighten.
REGIONAL MARKET FUNDAMENTALS
Note:
and
Completions, Average asking rents, Y-o-Y growth Note: Rental rates in USD for U.S. and Mexico, CAD for Canada.
33.9% 28.9% 7.6% 7.6% 5.9% 5.3% 5.0% 3.0% 2.9% 3PL General Retail & Wholesale E-Commerce Only Food & Beverage
Parts
PA I 78/81 Corridor 3.8% $6.23
Chicago 2.5% $6.06
Dallas/Ft. Worth 5.2% $6.78
Houston 4.4% $6.60
Atlanta 4.2% $6.39
Miami 3.1% $12.27
Los Angeles 0.9% $18.48
Building Materials & Construction Medical Undisclosed
Note: YTD bulk transactions through 9/30/22
Inland Empire 0.5% $17.52
*U.S. markets indicating average asking net rents, other markets indicating prime rents.
**Data calculated from 30km radius of the capital.
Sources: CBRE Research, Q3 2022
CBRE National Partners, Q3 2022
CBRE Econometric Advisors Q3 2022
– Leasing activity is down 10% compared with this time last year, but up 36% from 2020. Light industrial (under 25K SF) users are hitting the brakes with a 21% reduction in transactions. 1.2 MSF+ leases are up nearly double compared with last year.
– 52 leases have signed in deals 1 MSF and larger, much higher than the 34 signed this time last year.
– 74% of all of lease transactions were new deals, the same rate as this time last year.
– Look for leasing activity to finish 2022 at 850 million sq. ft., 15% lower than 2021’s record total. Transaction volume includes new leases and
The supply response is being hindered by high borrowing costs, increasing construction costs and higher exit yields. As a result, the already very low vacancy rates in Europe continued compressing in Q3. This low availability is, in some instances, preventing additional leasing activity.
The demand and supply imbalance and the unviability of some further developments due to the factors mentioned above keeps adding pressure on occupational costs, both through rental growth as well as indexation. Several European locations increased again their prime rents quarter on quarter during summer.
Investment volumes continued robust European industrial and logistics investment reported an 18% rise in the first 9 months of 2022 compared to the same period in 2021. However, the UK, the largest market, was the first country to reflect the slowdown with a significant quarter-on-quarter fall.
REGIONAL MARKET FUNDAMENTALS
European completions, take-up and vacancy
European average prime yields
LOGISTICS PRIME YIELD & RENTS/SQM P.A.
Belgium (Brussels) 3.75% €65.0
Czech Rep (Prague) 4.25% €90.0
France (Paris) 3.75% €84.0
Germany (Munich) 3.40% €102.0
Italy (Milan) 4.30% €60.0
Netherlands (Rotterdam) 3.70% €80.0
Poland (Warsaw) 4.75% €66.0
Slovakia (Bratislava) 5.30% €57.0
Extremely low vacancy rates are restraining the number of units that can be offered to occupier and have left many requirements unmet.
Demand is strong in the year to date, particularly in the 3PL, production and manufacturing sectors.
The logistics sector is showing the quickest repricing of all European sectors, but investment volumes remained resilient in Q3 thanks to large transactions, but YTD growth slowed down.
European logistics prime rents, Y-O-Y growth
Spain (Madrid) 4.25% €70.8
UK (London) 4.25% £26.50/sq.ft. European industrial investment volumes
Source: CBRE Research, Q3 2022
take up and vacancy rate
ten countries mentioned above.
Industrial and logistics leasing activity eased across Asia in Q3 2022, with markets including mainland China, Korea and India recording weaker demand. Leasing volume in the Pacific was weak compared with the same period of last year, owing to a further drop in availability. However, the region logged a slight improvement in net absorption from the previous quarter, with activity edging up in undersupplied Sydney and Melbourne.
CBRE Asia Pacific Logistics Rental Index grew by 1.4% in Q3 2022, a slightly slower rate than in the previous two quarters. Rental performance across the region was bifurcated, with extremely low vacancy and soaring construction costs pushing up rents in Australia and New Zealand. Sydney, Adelaide, and Perth each registered rental growth of over 20% y o y this quarter.
Investors turn cautious following rate hikes
Industrial deals added up to US$3.7 billion, a decline of 49% y o y, the largest fall among the three sectors. Korea and Japan were the only markets to record growth in logistics investment volume, thanks to steady purchasing by REITs and real estate funds.
Vacancy picks up in Asia
Investor demand, total acquisitions
PRIME YIELDS & AVERAGE RENTS/SQ. FT./P.A.
Beijing 4.85% $8.9 Shanghai 4.80% $7.7
Hong Kong SAR 3.30% $20.5
Greater Tokyo 3.33% $10.6 Greater Seoul 4.50% $8.6 Singapore (Prime) 6.48% $13.1 Sydney 3.93% $12.0 Melbourne 4.15% $6.4 Brisbane 4.25% $7.3 Perth 4.75% $6.6 Auckland 4.78% $9.4 Delhi NCR 8.00% $2.7 8.9 Mumbai 8.25% $2.7 3.3
Sources: CBRE Research, Q3 2022 Note 1 CBRE tracks net absorption and completions for selected major markets in Asia (Mainland China Tier & Selected Tier II cities, Greater Tokyo, Greater Osaka and Singapore)
2 Vacancy All are as of Q3 2022 except vacancy rates in Australia, Auckland and Greater Seoul are as of Q2 2022
3 Singapore yield changed to 30 years leasehold en bloc industrial building, instead of 60 years leasehold strata titled factory as previously reported 4 Australia cities’ rents and yield changed to Super Prime industrial assets instead of Prime industrial as previously reported 5 Rent in Greater Seoul is as of Q2 2022
REGIONAL MARKET FUNDAMENTALS
Markets with tighter industrial vacancy on average seeing significantly higher rents and tighter spreads
40%
35%
Logistics (Prime) – Net Effective Rental Growth vs Spread (Forecast as of July 2022 Sydney 0.3% Perth 0.5%
30%
25%
20%
15%
10%
Melbourne 1.1% Brisbane 1.4% Shenzhen 0.4% Beijing 12.4% Shanghai 8.1%
5%
45% -100 -50 0 50 100 150 200 250 300 350 400
Rental Growth (2022F & 2023F as of July 2022) Spread (as of Q3 2022)
Guangzhou 8.6% Hong Kong SAR 2.7% Greater Tokyo 5.2%
0%
Greater Seoul 4.2%
Auckland 0.5% Singapore 0.2% -5%
Note: Vacancy is as of the latest available data for each market, and is represented by the size of the bubble within the graph. Spread represents the risk premium, which is the difference between property yields and 10-year government bond yields
Source: CBRE Research, November 2022.
John Morris john.morris1@cbre.com
Chris Riley chris.riley@cbre.com
James Breeze james.breeze@cbre.com
Matthew Walaszek matthew.walaszek@cbre.com
Jennifer Olsen-Suhr jennifer.olsen@cbre.com
Simon Blake Simon.Blake@cbre.com
Jack Cox jack.cox@cbre.com
Joerg Kreindl joerg.kreindl@cbre.com
Mark Cartlich mark.cartlich@cbre.com
Tasos Vezyridis tasos.vezyridis@cbre.com
Pol Marfà Miró pol.marfamiro@cbre.com
Luke Moffat
Luke.moffat@cbre.com
Matt Haddon matt.haddon@cbre.com.au
Liz Hung liz.hung@cbre.com.hk
Tony Lai tony.lai@cbre.com
Richard Barkham, Ph.D. richard.barkham@cbre.com
Henry Chin, Ph.D. henry.chin@cbre.com.hk
Julie Whelan julie.whelan@cbre.com
Jos Tromp jos.tromp@cbre.com
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