North American Big-Box Development and Leasing Achieves Best Year Yet in 2016
The core North American big-box sector finished 2016 with record fundamentals.
The core North American big-box sector finished 2016 with record fundamentals, including all-time highs in annual net absorption, leasing activity, product in development and construction completions. In fact, 2016 was the strongest year ever for big-box development and leasing, largely fueled by the engine of e-commerce.
A year-end recap of 2016 with a look ahead at 2017, this report studies big-box activity in North America and six of its major distribution markets.
- Atlanta: Big-box fundamentals were strong in 2016, despite a record level of new construction that increased the vacancy rate significantly at year-end. The rise in vacancy is likely temporary, with more than 4 million square feet of leased big-box product set to occupy in early 2017
- Chicago: E-commerce is driving demand with Amazon leading the way by signing 30% of the new big-box leases in 2016. Despite having the most big-box product under construction for a core market at year-end, strong leasing is likely to keep vacancies stable in 2017.
- Dallas-Fort Worth: The region’s central location and thriving economy continues to drive big-box development with more than 13 million square feet of new construction in 2016. Nearly 14 million square feet is under construction, which will make 2017 the fourth consecutive year of more than 10 million square feet of new development.
- Greater Los Angeles: Industrial big-box continues to benefit from a large, growing population and proximity to the ports of Los Angeles and Long Beach. Strong tenant demand should continue to put upward pressure on effective rents and keep absorption positive for the foreseeable future.
- New Jersey, Lehigh Valley/Eastern PA: Proximity to consumers remains the top demand driver for this combined statistical big-box region, as more than 61 million people live within 250 miles of the core. This geographic advantage will likely keep demand strong and fundamentals sound.
- Toronto: E-commerce remains a dominating factor for demand in Toronto, with Amazon, FedEx and Costco taking e-commerce facilities in 2016. The addition of several million square feet scheduled for delivery in 2017 will present strategic opportunities for big-box tenants in the coming year.