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Multitenant Distribution: Smaller Warehouses, But Bigger Performance

By Dennis Kaiser

Rapid growth in e-commerce has given rise to a new type of tenant that needs to support ever-tighter delivery commitments. Healthy demand and tight supply has made multitenant distribution (MTD) among the best performing commercial real estate segments, according to research by Cushman & Wakefield’s Jason Tolliver and Clay Westbrook.

They found that in 2017, MTD boasted the highest year-over-year rent growth of any property type. Further, its value on a per-square-foot basis is roughly 20% higher than the broader warehouse market with pricing continuing to increase. Cushman & Wakefield notes this segment realized a total return of 13.3% in 2017, well ahead of the overall commercial real estate return of 7%.

– Boasts the Highest Year-Over-Year Industrial Rent Growth at 6.2% In 2017

– Comprises 39% of the 14.3 Billion Square Foot U.S. Industrial Market

– Accounts for 59% of the Investment-Grade Universe of U.S. Industrial Product

– Returns Have Outperformed Other CRE Segments on A One-, Five, and 10-Year Basis

The MTD warehouse segment is generally described as warehouse/distribution buildings with small-to-medium footprints (typically 200,000 square feet or smaller), often with column spacing of 40 feet by 40 feet and clear height under 24 feet. Traditionally, tenants of these facilities tended to be local and regional distributors.

MTD comprises the largest share of U.S. industrial product, and an even greater share of industrial properties with income-generating promise that attracts the attention of institutional buyers. And tenant demand for MTD is expected to grow more than any other segment. Buildings near population centers that support efficient freight movement—reducing the time, distance and cost of both inbound and outbound transportation, while improving online and omnichannel service levels—are increasingly being sought as “final mile” nodes for retail supply chains.

Strong rent growth, still attractive income returns, and sustained investor demand will continue to drive performance in the coming years, predict Tolliver and Westbrook. Secular support for MTD from the ongoing transition to e-commerce means that even in a recession, MTD is unlikely to experience a significant or sustained correction in pricing. Cushman & Wakefield believes if an investor is seeking outsized returns or downside protection, MTD is a compelling proposition.


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Inside The Story

Download Cushman & Wakefield’s ReportConnect With Cushman & Wakefield’s TolliverConnect With Cushman & Wakefield’s Westbrook

About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

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