3PL Providers in the Inland Empire Top Big-Box Warehouse Demand in 2023

Third-party logistics (3PL) providers leased the most big-box warehouse space in the Inland Empire (IE), accounting for 58.6% of all transactions, the highest of any market in a new report from CBRE.

“The themes of rightsizing and streamlining supply chains, efficiency, flexibility and value stand out in this environment,” said Ian Britton, senior managing director at CBRE. “Companies seem more willing to outsource and utilize 3PL providers to avoid hiring their labor force, expensive set-up costs and capital investment in material handling, technology and automation.”

The IE continues to be one of the most in-demand big-box industrial markets, with leasing surpassing 30 million sq. ft. for four consecutive years. This trend is expected to continue throughout the year as occupiers aim to strengthen their storage and distribution capabilities.

“At the end of the day, it is about reducing delivery times to customers by using a 3PL network of strategic locations to access Southern California’s 24 million people as soon as possible,” Mr. Britton said.

More space became available in IE due to completed construction and tenant move-outs, increasing the overall vacancy rate to 3.7% in 2023. This vacancy rate is still relatively low compared to other cities, ranking fourth lowest in this report behind Mexico City, Los Angeles County and Nashville.

“Most agree that long-term fundamentals look solid, but many IE tenants have available capacity in their warehouses as demand levels have normalized from the pandemic-induced surge,” added Mr. Britton. 

Nationally, industrial construction activity peaked in 2023, with a record 413 million sq. ft. delivered to the market, causing a doubling of the vacancy rate to 6.6%. However, construction in progress dropped to 208.4 million sq. ft. by year end, half of the previous year’s total.

Retailers and wholesalers dethroned 3PL providers across North America taking 36% of all transactions. In addition to retailers & wholesalers, automobiles, tires & parts and building materials & construction also saw an increase in share of leasing activity, which overall fell 15.8% in 2023.

CBRE forecasts a 5% increase in big-box leasing volume in 2024 as current market conditions are favorable to tenants. This indicates a potential rebound in demand, as the market strives to catch up with the robust deliveries of newly constructed industrial spaces.

CBRE analyzed “big-box” warehouses of 200,000 sq. ft. and larger because warehouses of that size are crucial for extensive national and international product distribution. Encompassing the United States, Mexico and Canada, the big-box report found that industrial facilities had higher taking rents than in years past. Rent growth remained robust at 15.9%, but down from 25.1% in 2022.

Of the leasing activity that took place, demand was driven primarily by a desire to boost supply chain resilience, increase access to growing population centers, modernize space to accommodate increased automation and support continued e-commerce growth.

To read the full report, click here.