Spread Between Retail and Industrial Property Rents Continues to Compress, JLL Reports

Originally published on May 20, 2021. by Michael Tucker for Mortgage Bankers Association.

JLL, Chicago, reported the spread between retail property rents and industrial property rents is compressing as home deliveries speed up and e-commerce steals more and more market share from brick-and-mortar retailers.

“As e-commerce gains share of retail sales, industrial space is becoming more demanded and pushing rents,” JLL said in its U.S. Industrial Snapshot report.

JLL said the need for e-commerce distribution space is pushing retail and industrial rents closer together as delivery from fulfillment centers to consumers grows ever faster. “2019 saw the beginning of the rent compression, which coincides with a big jump in e-commerce’s share of retail sales,” the report said.

Industrial rents grew by nearly forty percentage points more than retail rents over the past ten years, JLL said. “We expect this trend to continue as more and more new industrial space hits the market and is leased up and as the low vacancy rates continue to set the stage for a competitive leasing environment. Both of these factors–the newer supply and leasing competition–contribute to a rise in industrial rents.”

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