In today’s news, we will look into the number of new warehouses being built in the United States is beginning to decline, although rents continue to be at extremely high levels. In the meantime, construction work on Phase 3 of the US 49/Midtown project will begin in Hattiesburg on Tuesday. In addition, Partners rejoice with the successful completion of the new Spangdahlem Elementary School in Germany. Also, the construction of new homes experienced a resurgence in September after plunging to its lowest level since 2020 as a direct result of increases in the cost of borrowing money. On top of that, the number of US offshore wind construction-ready pipeline projects is growing, but more contracts are being canceled.
US Warehouse Development Falls, but Rents Remain High
One by one, US logistics prices have fallen from 2022 highs.
Ocean carriers and truckload operators depressed rates, followed by air freight and LTL companies. Even parcel rates fell.
As building of new facilities has slowed to a crawl, warehousing rates may remain high despite the falling market.
Logistics warehouse construction starts in the US have dropped to their lowest level since Q1 14 due to declining demand and rising financing rates, causing developers to stop new projects, according to CoStar.
CoStar reported that retail net absorption has fallen, but 3PLs have demonstrated less appetite for warehouse space.
Atlanta, a recent powerhouse, built 6.2m sq ft of warehouse capacity during the past four quarters, 70% below the average in the previous two years and less than half the average net absorption rate over the preceding five years.
Prologis, the largest North American warehouse developer, experienced some of the damage, but its Q3 results above market forecasts yesterday. Revenue rose to $1.78bn from $1.15bn last year, including Duke Realty revenue, which Prologis acquired for $26bn. Adjusted net earnings fell 26.6% to $765m.
“Our results reflect strong execution by our team and the quality of our portfolio,” said CEO Hamid Moghadam. That so, unfavorable customer sentiment will impact on demand until the economy stabilizes.”
The company has 97.1% occupancy, down 60 basis points from last year. Customers renewed contracts on 46.4m sq ft of warehouse space, down 9% year over year.
CoStar expects the new construction reduction to be felt late next year. Most projects will be finished, although several started late due to building component shortages, thus they launched while the market was hot. Last year saw the largest development starts in 30 years.
Prologis forecast last month that US and European new building deliveries would drop by 35% or more in 2024 in a global trends document.
However, the report predicts success for warehouse developers and providers. E-commerce accelerated and customers built resilience to handle upheaval, according to Prologis analysts. Diversified sourcing and new routes with more ports of entry also increased demand.
An institutionalized developer and investor base and rising geographical and regulatory hurdles will limit capacity growth.
These estimates and sluggish new development reflect high storage rates.
Hattiesburg’s US 49/Midtown project Goes into Phase 3 Tuesday.
Tuesday will mark the beginning of the third phase of the Midtown Road/U.S. Highway 49 building project.
The City of Hattiesburg has announced that during Phase Three, the Frontage Road/Service Drive will be closed between the front of Forrest General Hospital and Adeline Street, and that access to Adeline Street from U.S. 49 would be restricted.
The City of Hattiesburg estimates that the last phase, involving the U.S. 49/Adeline Street crossroads, will take between two and three months to complete, barring any delays due to inclement weather.
Work on the median of U.S. 49 north and south of Adeline Street will be completed during this phase, as well as upgrades to West Frontage Road.
The City of Hattiesburg would like to remind everyone of the importance of this project by providing details about it. This is due to the following factors:
Improve traffic flow on Arlington Loop and supply a more efficient route to Midtown from U.S. 49; Supply a dedicated pedestrian and bicycle pathway from Kamper Park to Midtown; Install an additional traffic signal at the intersection of U.S. 49 and West Adeline Street.
Partners Commemorate New Spangdahlem Elementary School in Germany
In a groundbreaking ceremony on Spangdahlem Air Base on October 11, 2023, U.S. Army Corps of Engineers, Europe District Department of Defense Education Activity Program Manager Steve Ross discusses the importance of building the new elementary school. He celebrated the project with ceremonial groundbreaking with representatives from the Department of Defense Education Activity, U.S. Army Corps of Engineers, German construction partners, and Spangdahlem Air Base residents. US Army photo by Chris Gardner.
Partners attended a ceremonial groundbreaking for the new Spangdahlem Elementary School at Spangdahlem Air Base in Germany on Wednesday, amid cranes and staff.
“This (21st-century) building is a demonstration of the Department of Defense and DoDEA’s commitment to us and our children,” Superintendent Jason Ter Horst told project partners, press, and Spangdahlem Elementary students, faculty, and parents.
The U.S. Army Corps of Engineers, Europe District, DoDEA, LBB Trier, the Air Force, and others are building the school together.
U.S. Army Corps of Engineers, Europe District DoDEA Program Manager Steve Ross said, “We’re very proud of the opportunity to deliver a new elementary school for the children of Airmen and other personnel stationed here.” He then turned to the ongoing construction behind him “I know it doesn’t look like much now, but when the team is done there will be a beautiful modern, approximately 140,000 square-foot school with learning neighborhoods, sustainable features, and greenspace for outdoor learning and engagement where the more than 650 students and faculty can thrive.”
Incoming Spangdahlem Elementary School Principal Monika Kerner, 52nd Fighter Wing Commander Col. Kevin Crofton, and German regional construction office head Wilfried Hoffman joined Ter Horst and Ross in remarks.
To celebrate the project, the speakers, project partners, and three Spangdahlem Elementary School kids ceremonially shoveled soil to “break ground”. Crews have been making great progress since June, but the event allowed project partners to rejoice.
The new Spangdahlem Elementary School is part of DoDEA’s 21st-century school program, which uses technology to improve teaching and learning. Its neighborhood design will include a central core of learning studios, a teacher collaboration area, small group rooms, and one-on-one learning rooms. Moveable walls maximize flexible area and can respond to program changes.
The future school will promote 21st-century teaching and learning and combine sustainability and energy-saving features. Natural light and energy-efficient lighting systems; window glazing to let in natural light and outdoor views; efficient interior and exterior lighting systems, pumps, and fans that save annual energy costs compared to a standard design; and low-flow plumbing that saves thousands of gallons of water per year.
In September, Homebuilding Rose
Original Source: Homebuilding bounced back in September
Homebuilding rebounded in September after falling to its lowest level since 2020 when borrowing rates rose.
New house development started 7% higher than expected in August. Census Bureau data released Wednesday showed 1.358 million seasonally adjusted annual starts last month, below expectations of 1.38 million.
7.2% fewer units were started than last year.
To 1.473 million seasonally adjusted annual building permits, September fell 4.4% from August’s revised total.
Permits fell 7.2% on year.
Navy Federal Credit Union corporate economist Robert Frick said, “September numbers were a mixed bag, with starts up and permits down, but both remain low by historical standards, suppressed by high mortgage rates.”
He said builders are building smaller homes on less land and offering incentives, but to solve the housing crunch, borrowing rates must drop.
Residential building, primarily single-family homes, increased 3.2% in September to 963,000 seasonally adjusted annual starts, up from August’s revised number.
Single-family starts plummeted 19% in the Northeast in September, but rose in other regions.
The Northeast’s slower construction activity may be due to cooling demand and builders’ difficulty finding lots, said Bright MLS chief economist Lisa Sturtevant.
High mortgage rates and declining demand are worrying homebuilders, she said.
“Many builders have been offering upgrades or buying down mortgage rates to keep buyers interested,” she said. Rising property prices and mortgage rates approaching 8% will draw fewer buyers later this year.
Despite a 31% drop in new multifamily starts from last year, multifamily development rose 17% from August.
According to Sturtevant, apartment construction has increased over the past year, with a record number of new rental units in many metro areas and lower rents.
She said that in many US markets, renting is now cheaper than buying due to more rental inventory and lower rents. “If new apartment construction slows in the fourth quarter, renters’ relief may be short-lived.”
More Projects Terminate Contracts as US Offshore Wind Pipeline Increases
According to Business Network for Offshore Wind’s U.S. Offshore Wind Quarterly Market Report, despite severe financial challenges in the third quarter of 2023, the industry continued to grow.
The article highlighted Vineyard Wind and South Fork Wind, the nation’s first two commercial-scale projects, in construction. The two projects are nearing grid power delivery. The Business Network reported that other development projects have tripled in size and more are weeks away from final approval. The paper covers recent investments, state demand for offshore wind, and policy changes that advanced the U.S. market between July and September 2023.
In the third quarter, California gained authorization to acquire power generation while New England states strengthened their partnership to deploy offshore wind.
Despite this achievement, global economic upheaval caused contract terminations and delayed project deployment due to cost hikes.
Over the previous quarter, “the U.S. offshore wind market felt its growing pains, taking two steps forward and two steps back,” said Business Network for Offshore Wind founder and CEO Liz Burdock. “We celebrated our first two utility-scale projects nearing grid delivery, a decade-long milestone, but project delays and supply chain issues persisted.
“Building up a new industry was always going to include challenges and setbacks,” Burdock said. “We must work hard to develop a sustainable industry and supply chain immediately. Beyond headlines, we observed major permitting process developments, state collaboration, and supply chain growth that will build long-term market strength.”
Summary of today’s construction news
Overall, we discussed since their 2022 peaks, the costs of US logistics have gradually decreased. Rates were first lowered by ocean transport businesses and truckload operators, then by air transport and LTL firms. Postal rates went down, too. Because construction of new warehouses has slowed to a trickle, storage costs may remain high despite the market downturn. Meanwhile, on Tuesday, construction of the third and final phase of the Midtown Road/U.S. Highway 49 interchange will begin. Access to Adeline Street from U.S. 49 will be limited, and the City of Hattiesburg has declared that the Frontage Road/Service Drive will be closed between the entrance to Forrest General Hospital and Adeline Street during Phase Three. In addition, on Wednesday, amid cranes and employees, Partners witnessed the official groundbreaking for the new Spangdahlem Elementary School on the Spangdahlem Air Base in Germany. In Furtherance of, after falling to its lowest level since 2020 as a result of increases in borrowing rates, home construction rose again in September. The number of new home construction starts in August was 7% higher than anticipated. With 1.38 million expected, the 1.35 million seasonally adjusted annual starts reported by the Census Bureau on Wednesday fell short. Beyond that, Despite significant financial hurdles in the third quarter of 2023, the industry continues to grow, as reported by Business Network for Offshore Wind’s U.S. Offshore Wind Quarterly Market Report. California was given permission to purchase power generating in the third quarter, and a collaboration between New England states solidified in preparation for the deployment of offshore wind. Despite this success, global economic instability led to contract cancellations and implementation delays due to skyrocketing costs.