Industrial Facilities Near Airports Command Rent Premiums

Companies are locating distribution operations closer to air cargo ports as they contend with a raft of challenges, particularly higher transportation costs. Transportation comprises 45% to 70% of overall supply chain costs, according to CBRE Supply Chain Advisory, compared with just 3% to 6% for occupancy costs. So locating near airports can be highly cost effective. The reshoring of some manufacturing operations has been another catalyst for demand in airport markets. As a result, industrial properties near airports now command rents that are 18.8% higher than the typical industrial property.

Figure 1: Types of Items Imported Through Gateway Airports ($Billion)

Note: Equals the value of items imported through major U.S. gateway airports in 2021.
Source: U.S. Census Bureau.

Airports that achieve the highest rent premiums are Los Angeles (LAX), New York (JFK), South Florida (MIA), Chicago (ORD) and Philadelphia (PHL). These airports serve markets that are densely populated and lack developable land, contributing to rent premiums of 24% or more at properties located within a five-mile radius of them. Rent growth will likely accelerate in these markets due to highly constrained supply and elevated transportation costs.

Figure 2: Top 5 Airports with the Highest Rent Premium

Note: Compares first-year base rents signed 1/1/22 to 8/31/22 within 5 miles of the airport compared with the corresponding market.
Source: CBRE Location Intelligence, CBRE Research 2022.

Third-party logistics (3PL) companies accounted for the most (42.7%) leasing near airports through August, followed by general retail & wholesale (32.2%). By contrast, companies that focus only on e-commerce comprised less than 4% of airport leasing. Companies outsource to 3PLs to sidestep challenges like high rents and labor shortages. This is especially true near transportation hubs. So it is not surprising that 3PL’s share of airport market leasing exceeds their share of the overall industrial market (35.6%).

Figure 3: Top Occupiers Near Air Cargo Ports

Note: Includes industrial new leases and renewals 100,000 sq. ft. and above signed 1/1/22 to 8/31/22 within five miles of an airport in markets tracked by CBRE.
Source: CBRE Location Intelligence, CBRE Research 2022.

Demand for industrial properties near airports is expected to increase as companies diversify their supply sourcing to safeguard inventories and meet consumer needs. Therefore, rent growth in airport markets can be expected to outpace the industrial market average for the foreseeable future.