Why Industrial Development Costs Have Continued to Spike
March 17, 2022 | Patricia Kirk | WealthManagement.com
Everyone is still feeling the effects of inflation caused by shortages of all types of consumer goods, from groceries to gasoline. Shortages of certain products and high inflation have been the lingering effects of pandemic-induced supply-chain disruptions that are not only slowing the delivery of finished goods, but also parts and raw materials needed to manufacture a variety of products, from automobiles to semiconductor chips. These forces are also affecting raw materials and other products used in construction projects.
In a vicious cycle, shortages in construction materials that are delaying new deliveries of industrial space to the market are compounding supply-chain issues as the lack of necessary storage space for arriving products has created port bottlenecks and slowed down the process further.
With demand for industrial space outpacing supply, nation-wide industrial vacancy at year-end 2021 hit a record low of 3.2 percent, reported commercial real estate services firm CBRE.
“In-flight or planned projects have been hit hard by significant lead-time issues and availability woes since late 2020 due to myriad reasons,” says Dan Richardson, director, cost consultancy, with CBRE | Global Workplace Solutions. For example, the cost for commodities such as concrete and steel, has seen double and triple digit increases respectively over the last two years. This pattern will likely be further compounded by the passage of the Biden Administration’s infrastructure bill, which will create more competition for these products.
