California’s Inland Empire led all markets with 42.5 million sq. ft. in transactions
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, according to CBRE. 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 average vacancy rate for big-box industrial space in these markets ended in 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).
Demand was driven by 3PLs, which accounted for 34.5% of the total deals in 2020. Transaction activity increased by 21% year-over-year in 2020 and net absorption increased by 40% to 25.1 million sq. ft.
The large population gives the Inland Empire one of the largest big-box industrial labor forces in the country. More than 100,000 people are employed in the warehouse industry, according to CBRE Labor Analytics. This is expected to grow 25% by 2030.
“The Inland Empire is the single largest Class A industrial market in the U.S. with an abundance of Fortune 500 companies moving goods through the Ports of LA and Long Beach to the southwestern part of our country,” said Ontario-based CBRE Executive Vice President Dan De La Paz. “Historically, this market has developed 15-25 million square feet of new space each year, now this market is maturing and running out of land, thus accelerating industrial real estate values at the fastest pace ever seen.”
|Market||2020 Total Square Feet Leased|
|Southern New Jersey/Eastern Pennsylvania||41.8M|
|Northern/Central New Jersey||13.8M|
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”.
To download the report, click here.