Multi-Tenant Distribution Warehouse Outlook
Smaller Warehouse, Bigger Performance
The multi-tenant distribution (MTD) warehouse segment is generally described as warehouse/distribution buildings with small-to-medium footprints (typically 200,000 square feet or smaller), often with column spacing of 40 feet by 40 feet and clear height under 24 feet. Traditionally, tenants of these facilities tended to be local and regional distributors. More recently, the rapid growth of eCommerce has given rise to a new type of tenant who needs to support ever-tighter delivery commitments.
Healthy demand and tight supply has made MTD among the best performing commercial real estate segments. In 2017 MTD boasted the highest year-over-year rent growth of any property type. Further, its value on a per-square-foot basis is approximately 20% higher than the broader warehouse market with pricing continuing to increase. This segment realized a total return of 13.3% in 2017, well ahead of the overall commercial real estate return of 7.0%. On a one-, five- and 10-year basis, MTD properties have outperformed the broader commercial property market and other industrial segments.