Although negotiation power for industrial facility renters was increased during the recession due to higher vacancy rates, the ongoing economic recovery has started to erode gains experienced during this period. To help procurement professionals make better buying decisions, business intelligence firm IBISWorld has added a report on the procurement of Industrial Facility Rental to its growing collection of procurement research reports.
Los Angeles, CA (PRWEB) December 15, 2013
Industrial facility rental has a buyer power score of 3.0 out of 5. This score reflects high demand driver volatility, rising price trends and high switching costs associated with industrial facility rentals. The industrial facility rental market was severely impacted by the recent global recession. “The fall in the number of US businesses led to the shuttering or offshoring of a substantial number of manufacturing operations, which sent the vacancy rate for industrial facilities higher,” says IBISWorld procurement analyst Andrew Rogers. “As a result, lessors of industrial facilities cut or froze rental prices to remain competitive and attract tenants.” Nevertheless, though negotiation power for renters was increased during the recession, the ongoing economic recovery has started to erode any gains experienced during the period.
The price of industrial facility rental is expected to rise further in the three years to 2016. The recovering economy is spurring growth in the number of US businesses, which is subsequently driving down vacancy rates for industrial facilities. Moreover, the turbulent real estate market has been stabilized by rising business activity, and many manufacturing operations that were shuttered or shipped abroad during the recession are restarting across the United States. Consequently, vacancy rates are quickly declining and prices are beginning to trend upward. “The renewed manufacturing activity is negative to renters because it has decreased facility vacancies and has driven up prices, creating fewer opportunities to negotiate lower rental rates,” adds Rogers. Renters of industrial facilities will benefit from an abundance of suppliers, as more participants can lead to greater facility selection. However, prices will be subject to market conditions and renters will likely have limited power in negotiations. Large players such as Prologis, CBRE Group and Jones Lang LaSalle maintain a substantial amount of market power due to their expansive geographic footprint and greater number of properties and financial resources.
Finally, because renting an industrial facility represents a long-term commitment, the negotiation power of renters is limited due to high switching costs. With contract lengths that average five years, renters are typically unable to switch locations without incurring substantial financial penalties. Moreover, many renters will be required to undertake significant renovations to industrial facilities to create a functional work space, and securing a new facility will likely require additional investment in construction. For more information, visit IBISWorld’s Industrial Facility Rental procurement research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist renters of industrial facilities. Industrial facility rentals include manufacturing and industrial buildings, but exclude professional and office buildings, shopping centers, retail stores, mini-warehouses, self-storage and other nonresidential buildings and facilities. Suppliers of industrial facilities include owner-lessors and establishments that rent real estate and act as lessors in subleasing it to others. Industry establishments may manage property themselves or outsource management responsibilities.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Vendor Financial Benchmarks
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.
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