Q1 2022 Industrial Highlights
Colliers came out with their quarterly reports this past week, and the results continue to impress. Compared to previously quarterly reports highlighting e-commerce trends, limited new supply and rising rents, this quarter touched on broader set of major economic points like persistent inflation, rising labor costs, escalating fuel prices, the war in Ukraine and continuing supply chain woes. A hand-picked list of points I found most interesting are outlined below:
Oahu industrial vacancy and lease rates stand at 1.44% and $1.30 psf/month. These numbers stood at 1.60% and $1.27 in Q4 2021. Pretty soon we might see higher rates than vacancy on the island.
Only 70 industrial spaces were available at end of Q1 2021, a record low.
2021 wholesale / distributions sales are up 35.5% compared with 2020.
2021 building permits up 24% vs 2020 and 9% vs 2019. With slow permit issuance times, it’s likely this backlog only grows and very gradually unclogs over the next few years, creating persistent industrial demand from Oahu’s construction industry for an extended period of time.
Starting April 10th, Hawaii-based shipping companies to incorporate a shipping fuel surcharge of 46% (from 38% previously), bumping the cost of a container to Hawaii up from $8,000 to as much as $8,700. Between trucking costs to deliver goods to port and shipping costs to Hawaii, the cost of doing business in the islands has never been more challenging.
Limited available space and growing competition is likely to push rents higher for the foreseeable future. Q1 2021 rents of $1.30 psf / mo have officially surpassed year-end 2017 numbers. With limited speculative development, Colliers thinks vacancy could hit a record low of 1.26% by year-end 2022.
Weighing out all these points, it’s unclear where the market shakes out over the coming months, and even years. Headwinds include material cost inflation, spiking gas prices, accelerating labor costs and rising interest rates. However, available land has never been tighter, speculative development lower and e-commerce / distribution trends stronger. The pressure is mounting on all sides. Absent the biggest factor of them all - an economic downturn - it’s hard to see a scenario where industrial space on Oahu is any less precious than it is today.