Supply Chain Modernization Creating Robust Demand for Big-Boxes at Mid-Year

Industrial real estate sees strong leasing activity and vigorous development. 

Industrial real estate throughout North America is thriving with higher effective rents, strong leasing activity and vigorous development. Demand for industrial real estate is no more evident than in the big-box segment. Retailers, wholesalers and third-party logistics companies are consolidating multiple warehouses into larger state-of-the-art facilities located near population centers, ports and other major intermodal facilities. This consolidation is part of an overall supply chain overhaul to cut costs and more importantly meet the needs from the fastest-growing demand driver in North America: e-commerce.

KEY TAKEAWAYS

  • Atlanta: Increased demand from retailers and wholesalers is driving strong leasing and absorption with effective rents reaching a post-recession high at $3.02 PSF/year NNN. Demand in this market sparked 8.9 MSF of new big-box construction during the first half of 2016, compared to 6.1 MSF completed in all of 2015.
  • Chicago: Wholesaler and e-commerce expansions are driving continued increases in big-box construction with 11.7 MSF under way in Q2 2016 to meet the need for modern distribution facilities. 
  • Dallas-Fort Worth: Anticipated activity from the 30 MSF of active tenants in this market will drive new development absorption in the region, which saw 9.5 MSF of big-box space completed in the first half of 2016 versus 9.7 MSF in all of 2015.
  • Greater Los Angeles: A record-breaking 45 big-boxes, totaling 22.8 MSF, were added to the inventory this past year, bringing the total existing big-boxes in this market to 676, totaling 370.4 MSF - by far the most in North America.
  • New Jersey, Lehigh Valley/Eastern PA: Demand from logistics and e-commerce users propelled this market to emerge as one of the most robust in the country. Big-box leasing activity has more than doubled between Q2 2015 and Q2 2016. During the first half of 2016, a total of 18.4 MSF were leased, the most for a core North American market.
  • Toronto: Construction activity continues to grow, despite a slow start to 2016. Developers are bullish on this market with just under 6 MSF of big-box space under way.