Real estate prices remain elevated

PANDEMIC-RELATED SUPPLY chain constraints, which helped drive commodities costs up, continue to have a lingering impact on overall costs and material lead times for construction of new industrial buildings.

According to Cushman & Wakefield’s North American Industrial Costs Guide, the significantly higher interest rate environment in the United States and Canada has also provided additional upward pressure to costs.

“Construction activity in the industrial sector has raced to keep up with robust demand of the last two years in North American markets. While industrial construction pipelines continue at historically high levels, the sector is facing several headwinds,” said Brian Ungles, president, project and development services at Cushman & Wakefield.

“The demand for industrial space – largely fuelled by the e-commerce sector, has led to historic levels of construction, and competition for materials and labour. This along with widespread inflation, has driven construction costs higher.”

The industrial sector has been among the winners in the wake of the pandemic.

Skyrocketing e-commerce demand –along with focus on improved supply chains and increased interest in manufacturing onshore – has driven North American industrial demand over the past three years. In the U.S. alone, over 1.3 billion square feet (bsf) was absorbed between 2020 and the end of 2022. The priciest markets are located in the Western U.S. and Canada. Of the top six most expensive markets, four are located on the West Coast and two are located in Canada. They are Portland; Calgary; San Diego; Seattle; Oakland; and Montreal.