To download the notes from Bill Gladstone's ULI speech click here.

Warehouse Trends

• Buildings have been getting larger for the last 20 years (150,000 ® 1M-1.5+ SF). That is up to 35 acres under one roof.

• Tenants like greater amenities such as trailer parking, car parking, and processing centers.

• There is a need for greater security. Inbound trucks are being processed at “a welcome center” outside the fence.  Over the past five years everyone is more “security conscious” and the inbound trucks are not let inside the fence to loiter.  This trend will continue far into the future. 

• The cost of construction for these large warehouses has increased over 50 percent during the past five years.  It used to cost $28 per SF for land and building.  Now it is running $40-$45 per SF for land and building. 

• With costs now in the $40-$45 per SF, the rental rates have also moved north from $3.95 - $4.10 to $4.35 - $4.45 per SF

• A trend to counter the rise in rental rates is that more cube height is being built; as high as 45-60 feet and even up to 80 feet in buildings in New Jersey right now. Most likely this trend is headed to Pennsylvania.

• As rates move upward there are still Class A buildings that will continue to lease at the $3.95-$4.10 per SF rate. These will be buildings that have some objections (limited trailer parking, limited car parking, office configuration, etc.). 

• Typically one trailer parking space is offered for each 7,000-10,000+ SF of warehouse space.   There’s currently a 10-year deal in place that’s paying $200 for each trailer space over the 7,000 SF limitation.  They have 250 spots, so they are initially paying $600,000 annually and are taking two percent annual increases. Even at these rates they are pleased to have the space. 

Office Trends

• Floor Plates: They have trended to 15,000-20,000 per SF and have stayed there.  I don’t see any need to increase the size.

• Demand for office space within the next 12-24 months will be weak, there is a lot of space to be absorbed.

• The Vacancy in the Suburbs:  
       A space - 8%+
       B-10-12%
       CBD - A space - 5%+
       B- 6-8%

• Total Supply- East Shore    
       4.5+/-MM
       West Shore - 5+MM
       CBD - 4+MM

• Absorption - approx. 100,000 SF 150,000 SF annually

• Overall Vacancy is well over 1MM + SF

• Co-Star moving into the area in direct response to our need for accurate information, will help all of us do our jobs much better.

• Over the next 24 months new construction will be build to suits only.  There will be no buildings built on speculation.

Commercial Trends

Corners at signalized intersection:

• They used to be $70,000-$75,000 NNN annually about 5 years ago.  Now the process has escalated to $95,000-$100,000+ NNN annually.  That’s over a five percent annual increase for the past five years.

• Drug stores will continue to pay more than other users. The two other users who will pay more (but not as much as a drug store) are banks and also convenience stores with gasoline. 

Acquisitions:

• We will see more of these, as cash flow from an established customer base starts day one.  Acquiring other companies will not take as long as land development of new sites.  

Free Standing Commercial Buildings from 5,000-15,000+ SF:

• They will continue to command a premium. Currently these buildings are selling   from 100-140/SF  Over the next two years the push will be to $150-$200/SF, again due to the lack of supply of well positioned locations.