Opportunity for Build-to-Suit Industrial Warehouse Space in Worcester

Drew Higgins
August 2019

Nationwide demand for urban warehouse space has outpaced supply in the past decade.

Supply of Industrial Warehouse Space in U.S.

Before the recession occurred in 2008, there was a fair amount of new warehouse construction. But the recession led companies to vacate their industrial real estate. When the recovery from the recession began, there wasn’t much immediate need to build new warehousing facilities because inventory was high and many of it was new recently built space. It wasn’t until after 2013 that this empty space began to be absorbed and new construction resumed.

Demand for Industrial Warehouse Space in U.S.

Meanwhile, the trend toward online shopping has driven the need for more warehouse space with no end in sight. In 2018, consumers spent $517 billion online with U.S. merchants, up 15% from $450 billion the year prior, according to the U.S. Commerce Department. Forrester Research expects online sales to surpass $712 billion by 2022.

Increasingly, the location companies want to build these logistic warehouses is typically dense and urban. Why? Companies want to build a fast reacting supply chain that is nearer to their customers. Competitive battles between retail behemoths like Amazon and Walmart will be won over who can best fulfill the promise of one-day and same-day delivery in the very near future.

And, they don’t want the low ceiling warehouses that were built forty years ago. They want industrial warehouse spaces with high-bay ceilings that are 24’ and higher. The average new warehouse is being built with 33’ ceilings with some as high as 40’.

Low Inventory of Warehouse Space in Worcester Presents Opportunities

Today, the vacancy rate for high-bay industrial warehouse space is at an all-time low in the City of Worcester. Space is virtually impossible to find that has ceiling heights with 24’ clear in the Worcester market. At Kelleher & Sadowsky, we are finding there are a number of industrial users in the market looking for 10,000 to 30,000+ square feet than cannot find industrial buildings to lease and even less options to purchase.

As a result of this shortage on inventory for high-bay industrial warehouse space in Worcester, we envision an increase of developers and investors beginning to build on speculation in the near future.

And, for business owners who are considering purchasing land to build their own operation, they should consider constructing a larger building with room for expansion. In the meantime, they would have a great opportunity to lease out the remainder of the building for some of the highest lease rates we have seen recently in warehouse space. Operating in your building, while also being a landlord is great way to offset expenses and to create income while building equity in your long-term real estate investment.

As a long-term investment, Worcester’s location is ideal from a shipping and distribution perspective. The City is located at the heart of New England. Goods and services are no more than an hour away to Boston, Providence or Hartford. And New York City is less than 3 hours away.

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Should you have any questions about this article – or any commercial real estate matter – please feel free to contact me at [email protected] or call me at 508—635-6784.

2019-08-27T19:23:39+00:00