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E-commerce growth fuels warehouse demand — and higher land prices

E-commerce expansion has companies scrambling to expand their warehouse networks — but their efforts come with hefty price tags.

As e-commerce players continue their quest to shorten their delivery windows, more companies are eager to operate warehouses close to where their customers reside. Besides struggling to find available industrially-zoned land — especially near cities, now companies are facing a new challenge.

A new study from real estate services firm CBRE said that some plots of land now cost twice the amount they did a year ago. This is especially true in major markets, including Atlanta and Houston, according to CNBC.

The CBRE study, which is based on 10 U.S. markets, revealed that the average price for "large industrial parcels" (50 to 100 acres) now sits at more than $100,000 per acre. This is a jump from about $50,000 a year ago. The cost of land for smaller warehouses in or near cities — like those used for last-mile or same-day delivery — rose to more than $250,000 an acre, up 25% from 2016 to 2017, according to Recode.

In CBRE’s study, David Egan, the group’s global head of industrial and logistics research, said that one way to avoid high land costs is to repurpose vacant malls and retail centers into warehouses. While that process has begun, the concept is not yet widespread.

Escalating prices will also slow the availability of land and building supply to catch up with retailer demand.

"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," Egan said in the CNBC report.
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