North American Big-Box Market is Riding a Wave of Robust Demand in the Second Half of 2017
Presented in an interactive format, the Industrial Logistics & Transportation Solutions 2017 Year-end Big-Box Review and Outlook offers an overview of North American big-box activity in the second half of 2017.
- With the rapid rise of e-commerce, the North American big-box demand continues to grow and now represents over 10% of total non-auto retail sales. Record amounts of absorption kept the overall vacancy rate at an all-time low of 6.9% despite a record 128 million square feet of new development.
- On the investment side, capitalization (cap) rates dropped to a record-low 5.8% in 2017, with many core markets posting cap rates at or near 5%. While demand for big-box product was solid in core markets, the decreased amount of product to purchase in these markets has pushed investors into secondary markets, where fundamentals are improving and there are more opportunities for higher yields.
- While we predict 2018 fundamentals to remain robust, there are headwinds to look for. The issue causing the greatest concern is the availability of labor. The demand for labor has been magnified by e-commerce distribution’s heavy employee counts and significant seasonal spikes in demand. With labor demand increasing, more companies will require additional advanced site selection processes to grind down the exact submarkets where available labor can be found, and this process in site selection will gain importance over a submarket’s logistics advantages and building functionality.
- Despite this headwind, the big-box market seems poised for continued growth as North American economies remain strong, e-commerce continues to grow at a faster rate than traditional in-store retail and logistics drivers from the air, ground, sea and rail continue to post gains.