McGuireWoods Consulting senior vice president and director of infrastructure and economic development Chris Lloyd was quoted in the August issue of Expansion Solutions Magazine discussing the distribution market.
In the article titled “Distribution Market Shifting, But Remains Strong,” Lloyd noted that the activity and leasing is currently not at the white-hot pace of the COVID era, “when it seemed like there were projects going on all over the place” with “properties often leased before ground was broken.”
However, the recent marketplace is quite different. “Six months ago, I would have said that [the distribution market] was nearly dead” due to the “record amounts of new warehouse capacity” added during 2020-2022.
“Today, there’s some subleasing with the overcapacity in certain markets, which is still being absorbed,” Lloyd noted.
“The rise of interest rates and construction costs due to inflation has also affected that part of the market. There also remain several supply chain constraints impacting delivery of new product… As a result, new product is coming online more slowly.”
Lloyd also noted that opposition has been an additional challenge. “Some communities have said that they’re not going allow any more such projects of a certain size, sometimes including last-mile facilities near larger population centers that are typically smaller than the big warehouses. People don’t want the traffic and the trucks that come with such projects.”
Lloyd notes that developers must also contend with a desire for a specific type of project, one that may create more jobs or data centers “that generate strong tax revenues with the traffic. These are policy choices developers are having to take into consideration when determining how best to position their land holdings.”
