KKR to Build Warehouses as Demand for Space Outstrips Supply

Demand for space to store, distribute and manufacture goods continues to outstrip supply, and KKR has turned to building warehouses after being a big buyer of the properties.

The real estate unit of the private equity giant has started ground-up industrial developments in Atlanta, Dallas, Denver, and Florida. KKR's current 45 million- square-foot industrial portfolio will be increased by 180,000 square feet with the addition of the midsized warehouses for last-mile deliveries.

Amazon.com Inc., the main driver of the e-commerce boom, said last month that it had overbuilt its logistics network, cutting into the company's productivity and profits. Despite supply-chain disruptions, KKR and other industry players still see a need for warehouses.

Ben Brudney, who oversees KKR's industrial real estate investments in the U.S., said that they continue to see strong demand for high-quality industrial space.

Funding for the projects will come from the KKR Real Estate Partners Americas III fund and a $200 million construction loan. KKR agreed to acquire $7 billion of industrial properties before the latest effort.

In the first three months of the year, the US warehouse vacancy rate fell for a sixth straight quarter to 3.4%, even as 90 million square feet of new space were completed. Industrial-property sales in the first quarter totaled $33.9 billion, and prices jumped 30% from a year earlier to a record high.