Activity driven by spike of online shopping during COVID
Global property consultant CBRE, the top North American markets for large warehouses (200,000 sq. ft. or larger) saw record transaction activity in 2020, with the total number rising 25 percent. The surge in leasing activity was fueled by pandemic-driven growth in online shopping.
CBRE's report examined 22 markets with more than 75 million square feet of big-box facilities. In total, big-box transactions accounted for 349 million sq. ft. of activity in these markets, up nearly 25% from 280 million sq. ft. in 2019.
E-commerce-only users accounted for 27.1 percent of big-box transactions by square footage, followed by third-party logistics (25.8%) and general retail and wholesalers (24.7%).
"The pandemic underscored the importance of strong distribution networks, and the availability of warehouse space is a crucial piece of the supply chain," said John Morris, executive managing director and leader of CBRE's Americas Industrial & Logistics business. "Demand for industrial real estate across the country was--and continues to be--as strong as ever as companies work to keep up with consumer demand."
The average vacancy rate for big-box industrial space in these markets ended 2020 at 4.6 percent, down from 5.2 percent at year-end 2019. Toronto had the lowest vacancy rate in this category at a microscopic 0.3 percent.
California's Inland Empire led all markets with 42.5 million sq. ft. in transactions, followed by Southern New Jersey and Eastern Pennsylvania (41.8) and Chicago (41.1). Phoenix had the highest percentage of its overall inventory absorbed in 2020 (9.1 percent).
Overall net absorption in these markets (189 million sq., ft.) outpaced construction completions (182 million sq. ft,) last year. Currently, the under-construction pipeline totals 185.1 million sq. ft., with 43.7 percent of this space already pre-leased.
"We expect 2021 demand to be just as strong as 2020 - if not stronger," said James Breeze, Global Head of Industrial & Logistics Research for CBRE. "With nearly half of the under-construction product already leased, the main concern in most markets is the availability of enough supply to meet robust demand. Companies looking to expand may struggle to find available space, especially if they need facilities larger than 750,000 square feet"