North America Overview
Southern New Jersey-Eastern Pennsylvania
Northern-Central New Jersey
I-4 Corridor
Toronto
Atlanta
Columbus
Cincinnati
Indianapolis
Chicago
Memphis
Kansas City
Houston
Dallas-Fort Worth
Greater Phoenix
Inland Empire
Northern California
Click each market for more information
VIEW MARKET
116,984,627 SF $5.05 10.8% 3,804,121 SF
Existing Inventory: Average Rental Rate: Vacancy Rate: Net Absorption:
I-4 CORRIDOR, fl
214,447,503 SF $3.76 13.0% 12,962,885 SF
ATLANTA, GA
102,413,037 SF $7.84 10.4% 3,145,934 SF
NORTHERN CALIFORNIA
339,372,700 SF $5.69 4.0% 23,790,000 SF
INLAND EMPIRE, CA
59,165,659 SF $5.21 16.9% 1,062,466 SF
GREATER PHOENIX, AZ
45,432,955 SF $4.16 9.7% 3,968,271 SF
KANSAS CITY, MO
260,614,335 SF $3.91 10.6% 19,016,417 SF
DALLAS-FORT WORTH, TX
93,785,131 SF $5.09 10.6% 5,174,062 SF
HOUSTON, TX
104,849,592 SF $3.60 4.6% 3,609,784 SF
MEMPHIS, TN
272,439,780 SF $4.67 8.5% 17,426,927 SF
CHICAGO, IL
102,264,797 SF $3.93 6.9% 8,382,389 SF
INDIANAPOLIS, IN
72,320,061 SF $4.14 9.4% 2,076,433 SF
CINCINNATI, OH
90,083,127 SF $3.61 8.1% 2,479,249 SF
COLUMBUS, OH
234,907,327 SF $8.81 1.6% 4,107,142 SF
TORONTO, CANADA
114,858,025 SF $8.58 2.5% 6,380,435 SF
NORTHERN-CENTRAL, NJ
282,891,062 SF $5.42 8.5% 13,922,623 SF
SOUTHERN NJ-EASTERN PA
Ceiling heights of 28' clear or greater
Primarily used for distribution
200,000 SF or larger industrial building
Pre-cast or tilt-up concrete construction
What constitutes a big-box building?
In this unique interactive report, we examine the North American big-box industrial market in 2019, which includes the seven core North American big-box markets, as well as nine emerging secondary markets. We will highlight the fundamentals, take a look at demand factors including demographics and logistics capabilities and will assess what lies ahead for 2020 and beyond.
Unless otherwise specified, all report data is for year-end 2019.
Jack Rosenberg, SIOR National Director, Logistics and Transportation jack.rosenberg@colliers.com
Pete Quinn, SIOR National Director, Industrial Services | USA pete.quinn@colliers.com
Contact
A variety of factors across North America have impacted demand for big-box industrial facilities through the end of 2019. Core markets including the Inland Empire, Dallas-Fort Worth, Atlanta, Chicago, Northern-Central New Jersey, Southern New Jersey-Eastern Pennsylvania and Toronto continue to be the destination of choice for many occupiers, while emerging secondary markets that are near the fastest-growing population centers and in close proximity to the most utilized logistics hubs in the region continue to grow.
Big-Box Market Report
2019 Year-End Review and Outlook
North America
SCROLL TO MAP
Building Inventory
222
Fully Vacant
Big-Box Buildings
200,000 - 499,999 SF
3,821
Big-Box Buildings in North America
Taking NNN rent
Cap Rate
Under Construction
$3.52 $3.52 $3.50 $3.59 $3.70 $3.82 $4.17 $4.40 $4.49 $4.79
8.1% 7.8% 7.5% 6.9% 6.6% 6.4% 6.4% 5.9% 5.7% 5.7%
10,228,419 8,715,426 12,761,442 33,625,820 67,320,033 91,330,973 107,293,335 129,410,652 141,688,120 151,141,235
Construction Completions
36,045,140 8,898,043 12,587,508 19,754,682 50,892,894 84,810,509 109,156,627 133,312,474 138,213,131 152,174,717
Vancancy Rate
Leasing Activity
Net Absorption
13.9% 11.9% 9.1% 8.2% 7.8% 7.4% 7.1% 6.9% 6.9% 7.0%
81,359,911 91,291,308 112,780,658 115,520,784 132,437,852 140,723,299 159,831,516 187,006,993 176,328,101 193,432,216
11,629,433 42,444,497 62,239,897 32,263,242 55,806,652 84,171,975 99,630,567 124,705,797 125,700,178 138,481,665
Number of Buildings
Existing Inventory
Vacant Inventory
3,705 3,726 3,754 3,814 3,927 4,080 4,294 4,568 4,828 4,876
1,603,959,208 1,613,786,125 1,631,015,470 1,662,009,922 1,726,449,885 1,808,043,200 1,917,042,163 2,046,717,358 2,183,752,822 2,334,888,583
223,743,254 192,265,547 148,931,588 136,272,499 135,499,084 133,076,343 136,864,972 141,796,586 150,684,307 163,986,126
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Historical data
Notable Transactions
225 Midland Ct. McDonough, GA Investment $60.17 PSF
TA Realty 698,068 SF
650 Braselton Pkwy. Braselton, GA Investment $163.51 PSF
Monmouth Real Estate 373,750 SF
705 Braselton Industrial Blvd. Braselton, GA User $69.96 PSF
Uline 1,000,821 SF
405 King Mill Rd. McDonough, GA Investment $67.64 PSF
CBRE Global Investors 2,307,790 SF
Big-Box Sales - 2018
5390 Hunter Rd. Atlanta, GA Renewal
Kellogg's 903,145 SF
500 Palmetto Logistics Pkwy. Fairburn, GA New-Direct
Medical Depot 1,054,500 SF
Commerce 85 Logistics Park Commerce, GA Build-To-Suit
Haier/GE Appliances 1,099,880 SF
590 Coweta Industrial Park Newnan, GA New-Direct
Saddle Creek Logistics 1,208,301 SF
Big-Box Leases - 2018
Historical Data
The demand for labor has been magnified by e-commerce distribution's heavy employee counts and significant seasonal spikes in demand. Big-box e-commerce occupiers can require two to three times the amount of labor as a traditional distribution user needs. With labor demand increasing, more companies will require more 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 these headwinds, the big-box market seems poised for continued growth. The North American economies remain strong; transportation costs continue to rise at a rate faster than taking rents; 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. These drivers should outweigh the headwinds and create strong demand and rental rate growth in big-box markets for the foreseeable future.
Although we predict fundamentals to remain robust in 2019, there are headwinds to look out for. The issue causing the greatest concern is global trade. Growing trade tensions with some of our leading trading partners could undermine big-box demand, especially in port markets. China is of particular concern, as it is not only our top trading partner—including both imports and exports— but has the greatest trade imbalance with the U.S. While recent communications from Washington point to a willingness to negotiate a trade deal with China, industrial real estate demand could take a hit in the coming year if no deal is reached and tariffs are increased to 25%. Also, the election of a Democratic majority in the House of Representatives has made prospects for passage of the new North American Free Trade Agreement (NAFTA) deal less certain, potentially disrupting trade with Mexico and Canada and potentially negatively affecting industrial real estate markets along major trade routes between the three countries.
While 2017 activity was dominated by e-commerce retailers including Amazon.com, 2018 looks to be the year of the third-party logistics companies (3PL), with 3PLs signing a majority of the large transactions in 2018. The 3PL industry is expanding its e-commerce distribution capabilities faster than any other major industrial occupier, and this looks to continue in the coming quarters and will be a major demand driver in 2019. On the investment side, capitalization rates (cap rates) held steady at 5.7% in 2018, 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.
The Inland Empire remains the best performing big-box market in North America because of its excellent location, available land for development and strong labor force. The Inland Empire led North America in 2018 with more than 27 million square feet of new leasing, and produced a record 20.8 million square feet of net absorption. While the Inland Empire posted superior absorption figures compared with last year, many other markets posted year-over-year absorption increases. Although demand remains strong, the lack of large big-box space in nearly all of the markets tracked in this report (750,000 square feet and more) kept fundamentals from rising much farther. At year-end, there were 694 existing distribution buildings larger than 750,000 square feet in the U.S. (17% are in the Inland Empire) and only 39 of these were fully vacant.
Occupiers' supply chain strategies throughout the United States are going through immense change because of the rapid growth of e-commerce. In 2018, much attention was given to the final-mile and the challenges and opportunities that arose from this demand, especially in urban areas. While final-mile real estate got the majority of the press, the backbone of distribution throughout North America remained regional big-box distribution centers. The North American big-box market continues to ride a wave of robust demand brought on by a solid U.S. economy and, of course, the rapid rise of e-commerce. This demand is fueling record leasing activity, net absorption and development for big-box product throughout North America. The Inland Empire remains the best performing big-box market in North America because of its excellent location, available land for development and strong labor force. The Inland Empire led North America in 2018 with more than 27 million square feet of new leasing, and produced a record 20.8 million square feet of net absorption. While the Inland Empire posted superior absorption figures compared with last year, many other markets posted year-over-year absorption increases. Although demand remains strong, the lack of large big-box space in nearly all of the markets tracked in this report (750,000 square feet and more) kept fundamentals from rising much farther. At year-end, there were 694 existing distribution buildings larger than 750,000 square feet in the U.S. (17% are in the Inland Empire) and only 39 of these were fully vacant. While 2017 activity was dominated by e-commerce retailers including Amazon.com, 2018 looks to be the year of the third-party logistics companies (3PL), with 3PLs signing a majority of the large transactions in 2018. The 3PL industry is expanding its e-commerce distribution capabilities faster than any other major industrial occupier, and this looks to continue in the coming quarters and will be a major demand driver in 2019. On the investment side, capitalization rates (cap rates) held steady at 5.7% in 2018, 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. Although we predict fundamentals to remain robust in 2019, there are headwinds to look out for. The issue causing the greatest concern is global trade. Growing trade tensions with some of our leading trading partners could undermine big-box demand, especially in port markets. China is of particular concern, as it is not only our top trading partner—including both imports and exports— but has the greatest trade imbalance with the U.S. While recent communications from Washington point to a willingness to negotiate a trade deal with China, industrial real estate demand could take a hit in the coming year if no deal is reached and tariffs are increased to 25%. Also, the election of a Democratic majority in the House of Representatives has made prospects for passage of the new North American Free Trade Agreement (NAFTA) deal less certain, potentially disrupting trade with Mexico and Canada and potentially negatively affecting industrial real estate markets along major trade routes between the three countries. The demand for labor has been magnified by e-commerce distribution's heavy employee counts and significant seasonal spikes in demand. Big-box e-commerce occupiers can require two to three times the amount of labor as a traditional distribution user needs. With labor demand increasing, more companies will require more 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 these headwinds, the big-box market seems poised for continued growth. The North American economies remain strong; transportation costs continue to rise at a rate faster than taking rents; 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. These drivers should outweigh the headwinds and create strong demand and rental rate growth in big-box markets for the foreseeable future.
Vacancy Rate
Taking NNN Rent
Overall Net Absorption
14%
12%
10%
8%
6%
4%
2%
0%
7.5%
8.6%
7.8%
9.9%
7.2%
3.4%
7.0%
6.9%
200,000-499,999 SF
500,000-749,999 SF
750,000+SF
TOTAL
2018
2017
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
$4.96
$4.50
$4.53
$4.33
$4.02
$3.27
$4.79
$4.49
160
140
120
100
80
60
40
20
0
48.3
47.2
41.9
33.6
60.9
151.1
141.7
56.4
42.5
34.6
32.1
47.4
51.1
138.5
125.7
Total
Big-Box Key Statistics
38
694
750,000+ SF
51
836
500,000 - 749,999 SF
210
3,576
Big-Box Building Inventory
Ceilings heights of 28' clear or greater
Pete Quinn, SIOR National Director, Industrial Services pete.quinn@colliers.com
James Breeze National Director of Industrial Research james.breeze@colliers.com
Unless otherwise specified, all report data is for year-end 2018.
A variety of factors across North America created record demand for big-box industrial facilities across the country in 2018. Core markets including the Inland Empire, Atlanta, Dallas-Fort Worth, Chicago, Northern-Central New Jersey, Southern New Jersey-Eastern Pennsylvania and Toronto all posted robust fundamentals, while emerging secondary markets that are near the fastest-growing population centers and in close proximity to the most utilized logistics hubs in the region continued to grow. In this unique interactive report, we examine the record strength of the North American big-box industrial market in 2018, which includes the seven core North American big-box markets, as well as nine emerging secondary markets. We will highlight the fundamentals, take a look at demand factors including demographics and logistics capabilities and will assess what lies ahead for 2019 and beyond.
2018 Year-End Review and Outlook
North American
ALL MARKETS
Midyear 2018
Midyear 2019
Atlanta Chicago Cincinnati Columbus Dallas-Fort Worth Greater Phoenix Houston I-4 Corridor Indianapolis Inland Empire Kansas City Memphis Northern California Northern-Central NJ Southern New Jersey-Eastern Pennsylvania Toronto
Amanda Ortiz National Director, Industrial Research | USA amanda.ortiz@colliers.com
70
900
56
751
> 750,000 SF
Overview
The accelerated growth of industrial industries in the United States — including third-party logistics (3PLs) and e-commerce companies — maintained market fundamentals in 2019. Vacancy, transaction volume and net occupancy all remained healthy in the last year, albeit at slightly lower levels than 2018. In the fourth quarter of 2019, the share of e-commerce in total U.S. retail sales was 11.4%, up from 10.1% over the same time in the previous year. As of that quarter, retail e-commerce sales in the United States amounted to more than $158 billion U.S. dollars. In terms of industrial transaction volume, e-commerce accounted for 9.2% of activity in 2019, down slightly from 11.4% in the previous year. Amazon — by far the largest e-commerce occupier — transacted 17.7 million square feet in 2019, down from 19.5 million square feet in 2018. Amazon, while taking less square footage, continued to expand their footprint by taking more facilities in more locations. The emergence of COVID-19 early in 2020 should initiate a shift in consumer preferences, with a greater focus on online purchasing. General retail and wholesale firms encompassed a greater percentage of occupier activity in 2019, accounting for 23.7% of bulk occupier activity, up from 17.5% in 2018. 3PLs and packaging companies tallied the largest share of bulk transactions at 25.1%, totaling nearly 105.4 million square feet. The 3PL industry is expanding its distribution capabilities and will be a major demand driver going forward. In terms of occupancy gains and leasing activity, the Inland Empire remains the best performing big-box market in North America because of its excellent location, available land for development and strong labor force. The Inland Empire led North America in 2019, with more than 36 million square feet of new leasing activity and produced nearly 24 million square feet of net absorption. Occupiers are expanding warehouse locations to service online consumers and cut transportation costs. While there are some major factors affecting the broader U.S. economy, the need for stronger omnichannel strategies should keep industrial real estate demand active in the coming year. Overall, 239.8 million square feet of occupancy gains was recorded in 2019, with 131.3 million square feet in the big-box market, just 2.3% below 2018 levels.
Key Statistics
The Inland Empire, Atlanta, Dallas-Fort Worth and Chicago markets all posted occupancy gains greater than 20 million square feet, and all big-box markets posted positive net absorption over the last year. Although demand was strong, the lack of large big-box space in nearly all of the markets tracked in this report (750,000 square feet and larger) kept fundamentals from surpassing this time last year. At year-end, there were 751 existing distribution buildings larger than 750,000 square feet in the U.S. and just 56 of these were fully vacant. On the investment side, capitalization rates (cap rates) held steady at 5.6% at year-end, with nearly half of the core markets in this report 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. Although we predict big-box fundamentals to remain stable going into 2020, there are significant changes to monitor. Gauging the impact of COVID-19 on U.S.-China trade and, by extension, U.S. industrial demand, is difficult due to the fluidity of the situation. To put things in perspective, in 2003, China accounted for 4.3% of global GDP, but now accounts for 16.5%. China is much more intertwined and central to global supply chains in 2020 than in 2003. Expect the largest hit to China’s GDP in Q1 2020, and the largest hit to U.S. GDP in Q2 2020. While U.S. imports will likely weaken further across the board in the first part of 2020, expect East and Gulf Coast ports to take a lesser hit relative to their West Coast port counterparts. Economists have updated their initial v-shaped recovery outlook to a more conservative u-shaped recovery where a prolonged period of restoration is predicted. Despite the challenges facing the industrial sector, the big-box market is poised for continued activity. A number of big-box facilities are scheduled to deliver in 2020, with 172 million square feet under construction at the end of 2019. This will ensure availability to meet the demand of occupiers looking to optimize their supply chains.
Taking NNN Rate
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One of Atlanta’s many logistics advantages is its close proximity to the Port of Savannah, the fourth-largest seaport in North America and the second-largest on the East Coast. The Port of Savannah is home to the Garden City Terminal — the largest single terminal in the U.S. — which operates two Class I rail yards. Some of the largest industrial markets in the U.S. — including Atlanta — are within a four-hour drive from the Port of Savannah. In 2018, the region became home to the Appalachian Regional Port. The new inland port located in nearby Chatsworth, GA offers direct rail service from the Port of Savannah’s Garden City Terminal, significantly lowering truck traffic through the Atlanta area.
Major Logistics Driver: Port of Savannah
Senior Vice President | Atlanta
Ben Logue, SIOR
Atlanta is the economic driver and transportation hub of the fastest growing geographic region in the United States. The Atlanta metro population and its GDP contribution are both ranked in the top 10 nationally. Atlanta ranks third with the largest concentration of Fortune 500 companies. Atlanta’s Hartsfield-Jackson is the world’s busiest passenger airport — moving more than 101 million passengers annually. The Georgia Ports Authority moved a record 5.5 million twenty-foot equivalent units (TEU) and more than 650,000 auto and machinery units in 2019. The Atlanta industrial market added more than 114 million square feet of net absorption since 2014, averaging more than 19 million square feet per year. Atlanta absorbed 16 million square feet of industrial space in 2019. The Atlanta big-box market experienced its largest single year absorption in history at just under 13 million square feet, comprising 80% of 2019’s total absorption. Q4 2019 marked the 34th consecutive quarter of positive net absorption in Atlanta. By year’s end, only six vacancies with 500,000-750,000 square feet were available in Atlanta’s 740 million square foot industrial market. Economic diversity, abundant employment opportunities, and unsurpassed transportation, technology and financial infrastructure will continue to fuel Atlanta’s Tier 1 industrial market growth in 2020 and beyond.”
Georgia
Overall fundamentals were solid in Atlanta and its big-box market experienced a banner year for net absorption, totaling nearly 13 million square feet in 2019. This marks an 11.4% increase over the record set in the previous year. Despite the record year of occupancy gains, overall bulk vacancy increased to its highest level in six years. This is a direct result of construction completions topping 13.4 million square feet in 2019. The South Atlanta submarket dominated the market, accounting for almost half of the total absorption and leasing activity this year. Three of 2019’s top five largest industrial leases in the Atlanta market took place in South Atlanta including transactions by Goodyear and XPO Logistics, both signing leases in excess of one million square feet.
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Atlanta’s bulk market sees record year of absorption
5% cap rate
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All Markets
Big-Box Buildings in Atlanta
$2.85 $2.76 $2.80 $2.78 $2.89 $3.01 $3.25 $3.41 $3.51 $3.62
8.4% 8.5% 7.8% 7.6% 6.9% 6.8% 5.9% 6.1% 6.0% 5.5%
4,036,767 2,041,229 1,336,120 3,042,439 2,195,278 9,890,390 14,120,655 15,404,016 18,324,688 17,658,062
1,216,162 2,886,767 2,041,229 1,621,720 3,042,439 4,049,568 10,026,025 17,897,098 14,629,855 17,508,961
17.8% 18.3% 14.7% 14.5% 13.6% 8.2% 8.2% 11.3% 11.2% 10.7%
10,354,169 9,309,760 10,608,833 16,153,972 18,756,261 22,375,091 13,397,571 22,403,937 24,955,747 25,651,112
664,656 1,774,800 6,315,094 1,683,087 3,782,829 11,101,551 9,175,612 11,207,609 13,292,971 16,481,672
288 291 294 297 302 309 324 357 382 411
125,668,539 128,555,306 130,596,535 132,218,255 135,260,694 139,310,262 149,336,287 167,233,385 181,863,240 199,372,201
22,418,851 23,530,818 19,256,953 19,195,586 18,455,196 11,403,213 12,253,626 18,943,115 20,279,999 21,307,288
6
71
66
25
274
One of Atlanta’s many logistics advantages is its close proximity to the Port of Savannah, the fourth-largest seaport in North America and the second-largest on the East Coast. The Port of Savannah is home to the Garden City Terminal—the largest single terminal in the U.S., which operates two Class I rail yards. Some of the largest industrial markets in the U.S., including Atlanta, are within just a four-hour drive from the Port of Savannah. In 2018, the region became home to the Appalachian Regional Port. The new inland port located in nearby Chatsworth, GA offers direct rail service from the Port of Savannah’s Garden City Terminal, significantly lowering truck traffic through the Atlanta area.
Major Logistics Driver
The Atlanta big-box market continued to thrive in 2018 with robust leasing activity, new development and record high rental rates. Tenants moved into the market in droves because of the plethora of logistics advantages and, most importantly, a large and growing labor base. In 2018, a record 25.7 million square feet of big-box space leased, the second most in North America. Overall net absorption also reached record heights, finishing at 16.5 million square feet, also good enough for second place. With demand reaching all-time highs, new development projects hit the market at a record pace, with 17.5 million square feet of new development. Despite record new development, the overall vacancy rate decreased in 2018 to 10.7%, the lowest since 2015. Even though the vacancy rate is in double digits, developers are bullish on the Atlanta market, with 17.7 million square feet under construction—tied for first with the Inland Empire. Investor demand remains strong with many large-scale transactions closing. Because of robust activity, cap rates dropped below the North American average for big-box space, finishing 2018 at 5.5% Atlanta has the necessary factors for continued robust fundamentals. Its central location in the Southeast U.S. provides access to 28 million people within 250 miles. Along with growing inland logistics capabilities, these factors will be a boon for the market. In the coming quarters, it is expected that net absorption will remain positive and on par with 2018, vacancy rates will decline, cap rates will remain low and taking rents will rise above its current record high.
Senior Vice President Atlanta
“Atlanta is the transportation and logistics hub of the fastest growing geographic region in the country. Most major companies are locating or expanding in Atlanta, due to its growing population (especially in the millennial segment), and relatively low cost of living. Atlanta is home to the world’s busiest passenger airport and near one of the fastest growing seaports (Savannah) in the country. Because of this, Atlanta is on pace for another year of robust big-box growth in 2019.”
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PVH Corp. 982,777 SF 8500 Tatum Rd. Palmetto, GA Direct Lease
Stitch Fix 925,800 SF 801 Factory Shoals Rd. Lithia Springs, GA Direct Lease
Fr8 Auctions 527,000 SF 1265 Terminus Dr. Lithia Springs, GA Direct Lease
Atlanta Bonded Warehouse 499,320 SF 1050 Preston Blvd. Lithia Springs, GA Direct Lease
GLL Real Estate Partners 1,208,301 SF 590 Coweta Industrial Park Newnan, GA Investment $79,350,000 $65.67 PSF
TA Realty 848,421 SF 2160 Anvil Block Rd. Ellenwood, GA Investment $57,000,000 $67.18 PSF
MCB Real Estate 1,000,200 SF 1015 Collinsworth Rd. Palmetto, GA Investment $50,750,000 $50.74 PSF
Lexington Realty Trust 604,852 SF 7875 White Rd. Austell, GA Investment $45,300,000 $74.90 PSF
With only six fully-vacant buildings between 500,000-750,000 square feet available, this big-box sector would appear to be in short supply. This, however, is not the case as tenant demand for properties of this size has been tepid. Overall asking rental rates continue to show upward movement, increasing 3.6% year over year. There are, however, some submarkets where rental increases have stagnated for big-box facilities, including Northeast Atlanta and I-20 West/Fulton Industrial. Atlanta’s central location in the Southeast provides access to 28 million people within 250 miles. Along with growing inland logistics capabilities, these factors will be a boon for the market. The outlook for its big-box market remains solid, though new supply is expected to outpace demand, leading to an overall vacancy increase for the coming year.
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11
Big-Box Leases | Year-End 2019
Big-Box Sales | Year-End 2019
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NEXT: CHICAGO
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major rail lines have hubs in Chicago
Six of the seven
Brennan Investment Group 679,600 SF 2101 Dalle Rd. University Park, IL Sale-leaseback $23,000,000 $33.84 PSF
Prologis 866,808 SF 3 big box buildings Bolingbrook, IL 3-property local investment portfolio sale $66,150,000 $76.31 PSF
The Blackstone Group LP 886,213 SF 2580 Prospect Ct. & 1789 Hubbard Ave. Aurora, Batavia, IL Part of a 54-property national investment portfolio sale TBD
Colony Capital, Inc. 1,334,012 SF 4 Chicago-area big box buildings Various cities Part of a 58-property national investment portfolio sale TBD
FedEx Corporation 469,920 SF 145 S Pinnacle Dr. Romeoville, IL Direct Lease
Silgan Containers LLC 524,339 SF 2602 128th Ave. Kenosha, WI Direct Lease
Wholesale Interiors 549,588 SF 2805 Duke Pkwy Aurora, IL Sublease
Fresenius Kabi USA, LLC 590,525 SF Stateline 94 Corporate Park Pleasant Prairie, WI Build-to-suit lease
7
74
97
27
447
Chicago is the major rail center of the United States, claiming 70% of the nation’s rail and intermodal activity. Six of the seven major rail lines have hubs in the greater Chicago area, a major reason the region is one of the largest big-box industrial markets in the country. Two of these rail lines — the BNSF Railway and Union Pacific Railroad — operate large intermodal centers in Chicago’s I-80 Joliet Corridor submarket. Combined, these facilities are considered the largest inland port in North America. Rail is not the only logistics advantage that the region provides. Three of the nation’s busiest transcontinental expressways cross through the region. The Chicago Air Gateway comprises O’Hare International Airport and the Midway International Airport. Consistently recognized as one of the busiest airports in the world, Chicago O’Hare International Airport is not only a national aviation hub, it is also a global air cargo gateway, providing billions of dollars in trade to Chicago’s economy.
Major Logistics Driver: Rail, Inland Port, Central Location
Chicago’s big-box industrial market finished the year on a strong note, with the five largest big-box leases of 2019, all signed during the second half of the year. Following two years with few leases signed greater than 500,000 square feet, mega-sized leases returned in 2019, with nine new leases greater than 500,000 square feet signed during the year in modern big-box buildings. This demand will continue throughout 2020 as several large requirements remain active.”
National Director, Logistics & Transportation Group, Principal | Chicago
Jack Rosenberg, SIOR
The record absorption and new leasing volume recorded would have pushed the vacancy rate down even further, but developers delivered 40 new big-box buildings totaling 17.5 million square feet during 2019, the most since 2017 when 20 million square feet of big-box product was delivered. 27 of the 40 buildings delivered over the course of the year were built on a speculative basis, totaling 11.5 million square feet. At the end of the year, this new speculative product was 33.5% leased, meaning 7.6 million square feet of new big-box vacancy was introduced to the market in 2019. Extensive big-box development continued, even through the winter months, as 30 new buildings greater than 200,000 square feet were under construction at year-end, totaling 12.4 million square feet.
Demand for industrial space in Chicago’s big-box market — as measured by net absorption (or the net change in occupancy) — set a new record for the current cycle in 2019, totaling 17.4 million square feet. This figure eclipsed the previous record of 16.1 million square feet recorded in 2016 and was bolstered by 20.7 million square feet of new leases and lease expansions signed during the year in the market’s biggest, most modern industrial product — also a record for the cycle. The big-box vacancy rate correspondingly fell by 54 basis points over the year to 8.5%, the lowest it has been since the second quarter of 2017.
Demand for big-box industrial in Chicago reaches new high
Illinois
NEXT: CINCINNATI
PREVIOUS: ATLANTA
per year first year taking rent is the highest on record
$4.10 per square foot
Vertiv 483,000 SF 3500 Langly Dr. Hebron, KY Renewal
Fit for Life 208,120 SF 9107 Meridian Way West Chester, OH Direct Lease
TSC Apparel 195,866 SF 8586 Trade Center Dr. West Chester, OH Direct Lease
Thysenkrupp Bilstein 143,743 SF 3033 Symmes Rd. West Chester, OH Direct Lease
Modula Inc 252,000 SF 5000 Commerce Center Dr. Franklin, OH Owner User $13,161,960 $52.23 PSF
Exeter Property Group 245,000 SF 4700 Muhlhauser Rd. Hamilton, OH Investment $15,974,000 $65.20 PSF
Black Creek Diversified Property Fund 218,400 SF 9899 Sam Neace Dr. Florence, KY Investment $18,550,896 $84.94 PSF
Investcorp International Inc. 195,280 SF 4255 Thunderbird Ln. Fairfield, OH Investment $10,769,692 $55.15 PSF
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In 2017, Amazon announced plans to build a $1.5 billion, centralized Prime Air Hub at the Greater Cincinnati/Northern Kentucky International Airport (CVG). Upon full completion in 2026, the facility will encompass 3.3 million square feet and employ more than 2,000. The first phase — now under construction — totals 819,000 square feet and is scheduled for completion in early 2021. Amazon has been operational at CVG for over a year, sharing an air cargo facility with DHL, who operates its North American superhub at the airport. Cargo-related operations have increased significantly and CVG now ranks as the seventh-largest cargo airport by volume in the United States. In response to this rapid growth, development has increased in Cincinnati’s airport submarket anticipating demand from e-commerce and 3PL operators, while Atlas Air, an air cargo solutions provider, commenced construction on a new headquarters building near CVG.
Major Logistics Driver: Amazon Prime Air Hub
While demand for industrial product has gained momentum since 2018’s slowdown, that doesn’t mean there aren’t challenges. The “bread and butter” of the Cincinnati industrial market are occupiers needing about 150,000 square feet. Developers were building — and some still are constructing — distribution facilities of 500,000 square feet and greater. These owners are still searching for tenants for many of those larger spaces, accounting for the increase in vacancy recently. Many developers, though, have pivoted to constructing product in the 150,000 to 300,000 square foot range and have seen success in their leasing efforts.”
Senior Vice President & Principal | Cincinnati
John b. gartner III, SIOR
Construction activity remains elevated, totaling 6.1 million square feet under development at year-end, of which 67% is speculative. Big-box facilities account for 5.2 million square feet of projects under development. Speculative projects totaling an additional 1.4 million square feet are scheduled to break ground during the first quarter of 2020. If the trend during the final two quarters of 2019 is any indicator, demand levels should roughly keep pace as new supply is delivered, and vacancy will remain steady in the quarters to come.
During the current 10-year expansion period, net absorption totaling 40 million square feet outpaced new supply of 31 million square feet in the Cincinnati industrial market. Vacancy in the big-box logistics sector plummeted to 3.5% at midyear 2018, and has steadily increased since to 9.4% at the end of 2019, due to record amounts of new supply. With limited space options, demand — measured as total square footage of tenants in the market — dropped steeply but has recently begun to accelerate as availability has increased.
New supply driving demand in Cincinnati market
Ohio
NEXT: COLUMBUS
PREVIOUS: CHICAGO
The Rickenbacker Inland Port serves as a hub for importing and exporting freight via air and rail, positioning Columbus to take advantage of future increases in shipping to East Coast ports driven by the expansion of the Panama Canal. The majority of rail freight traveling to Columbus is international and reaches the Ohio Valley via East Coast and West Coast ocean ports. The Port is serviced by Norfolk Southern and CSX. The Norfolk Southern Rickenbacker Intermodal Terminal, which covers 175 acres and can handle more than 400,000 containers annually, is located in the heart of the facility. The land development within the Port has the capacity to grow to 70 million square feet of industrial space.
Executive Vice President & Principal Columbus
Michael Linder, SIOR
“Throughout the rest of the year, the Columbus market will continue to see growth and high demand in industrial space. Columbus has a strategic location, being within a 10-hour drive of half of the U.S. population. The city is seeing ongoing demand from 3PL providers, manufacturers and e-commerce companies, primarily in the Southeast and West submarkets. Additionally, Rickenbacker Inland Port is a point of access for cargo via air and rail, making Columbus ideally positioned for increased international cargo demand in the future.”
is the lowest in over a decade
4.2% vacancy rate
Walmart 758,465 SF 6198 Green Pointe Dr. Groveport, OH Direct Lease
Amazon 514,491 SF 3538 Tradeport Ct. Columbus, OH Direct Lease
ODW 223,963 SF 657 Tradeport Ct. Columbus, OH Direct Lease
Jeld-Wen 155,990 SF 87 Heritage Dr. Pataskala, OH Expansion
Mapletree 1,020,205 SF 3780 Tradeport Ct. Lockbourne, OH Investment $60,490,031 $59.29 PSF
Granite REIT 802,390 SF 1901 Beggrow St. Lockbourne, OH Investment $53,200,000 $66.30 PSF
Dream Industrial REIT 240,206 SF 4311 Janitrol Rd. Columbus, OH Investment $14,841,608 $61.79 PSF
Amnon & Dalia Hadari 229,333 SF 2850 Rohr Rd. Groveport, OH Investment $14,200,000 $61.92 PSF
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Throughout the new year, the Columbus market will continue to see growth and high demand in industrial space. Central Ohio has a strategic location, being within a 10-hour drive of half of the U.S. population, which assists industrial tenants reach their customers. The city is seeing ongoing demand from 3PL providers and e-commerce companies — primarily in the Southeast, East and West submarkets — allowing quick access to Interstate 70 and Interstate 71. Additionally, Rickenbacker Inland Port is a point of access for cargo via air and rail, making Columbus ideally positioned for increased international cargo demand in the future.”
Senior Executive Vice President | Columbus
Michael linder, SIOR
Construction also experienced a record-breaking year, as nearly 8.7 million square feet of big-box development was underway at the close of 2019. The largest leases in 2019 were signed by prominent e-commerce and logistics companies, which continue to drive activity throughout the market. Columbus saw another strong year in investment sales, posting 14 big-box sales totaling 8.3 million square feet and $455 million in total sales volume. Cap rates dipped to 7.0%, down from the 7.1% at the end of 2018.
Despite a slow start, the Columbus big-box market saw another strong year in 2019, posting nearly 2.5 million square feet of positive net absorption. More than 5.3 million square feet of industrial facilities were delivered in 2019, including 3.0 million square feet of big-box space. Due to the uptick in new supply, overall vacancy for bulk space increased slightly to 8.1%, but is expected to contract in 2020 as occupiers take advantage of the new product offerings. Overall rents for big-box properties saw an uptick to $3.61 per square foot — the highest on record — up from the $3.57 per square foot recorded this time last year.
Record-breaking construction in Columbus forecasts a strong 2020
Tremendous access and a prime location set the Columbus industrial market apart from similar metros, making it a global logistics leader. The Rickenbacker Inland Port — located just southeast of the city center — is the area’s major logistics driver. One of the world’s only cargo-specific airports, Rickenbacker has 500,000 square feet of air cargo facility space, 130 acres of cargo ramp and handles more than 255 million pounds of cargo every year. The Port is also home to a Global Logistics Park, which currently offers more than 70 million square feet of distribution space, with room for expansion. Rickenbacker Inland Port directly connects Central Ohio with the rest of the world, enabling industrial occupiers in Columbus to reach millions of global customers.
Major Logistics Driver: Rickenbacker Inland Port
NEXT: DALLAS-FORT WORTH
PREVIOUS: CINCINNATI
343 345 346 358 382 415 452 497 538 552
145,079,950 146,404,950 147,356,430 153,837,492 167,961,995 183,038,963 198,712,887 221,239,674 240,778,992 249,116,698
26,718,863 20,076,380 15,199,568 12,279,273 18,446,053 19,216,454 17,855,847 21,560,688 26,639,553 26,117,596
18.4% 13.7% 10.3% 8.0% 11.0% 10.5% 9.0% 9.7% 11.1% 10.5%
11,295,086 18,796,352 17,117,770 24,358,763 22,270,784 27,778,017 26,173,665 25,644,567 22,358,742 10,440,964
2,671,806 7,967,483 5,828,292 9,401,357 7,957,723 14,306,567 17,034,531 18,821,946 14,460,453 8,859,663
$3.21 $3.18 $3.22 $3.26 $3.51 $3.66 $3.72 $3.79 $3.82 $3.80
8.0% 8.0% 7.4% 6.3% 6.8% 7.0% 6.0% 6.8% 6.6% 6.6%
400,123 1,325,000 951,480 6,481,062 14,124,503 15,076,968 15,673,924 22,526,787 19,539,318 8,337,706
1,020,000 951,480 3,265,722 12,361,705 12,860,719 15,289,964 19,897,931 17,563,383 19,424,407 23,598,948
Dallas-Fort Worth’s central U.S. location enables the market to act as an advantageous distribution hub, with quick access to rail, air and truck transportation. The region is a global inland port with two locations capable of large-scale cargo operations: Alliance Global Logistics Hub and Southern Dallas County Inland Port. Home to major rail logistics operations for the two primary western U.S. railroads — BNSF Railway and Union Pacific Railroad — Dallas-Fort Worth can tap into major east-west arteries and provide important links to Mexican markets. By truck, distributors can efficiently move products throughout the central United States, reaching 93% of the population within 48 hours.
Executive Vice President Dallas
Tom Pearson, SIOR
“During the economic recovery from the Great Recession of 2008, Dallas-Fort Worth has ascended to be a major national and regional distribution hub. Industrial real estate is still the preferred property type among most institutional investors, and more capital is available than ever for industrial real estate deals. Hence the influx of out-of-town developers and investors who are setting up shop in Dallas-Fort Worth to either build spec or get in the build-to-suit game by purchasing industrial land. Industrial land has become a precious commodity and is exceedingly difficult to come by due to the intense demand by developers for infill and large tracts. It is particularly frustrating for the users who want to own their own buildings. All this has led to record construction of warehouses with currently 27 million square feet in the pipeline. Those locations in most demand are the ones that have a good labor story to tell as labor is still the number one criteria for tenants.”
Texas
of net absorption is 39% higher than the same time last year
8.9 million square feet
CTDI 705,955 SF 1753 Chaplin Dr. Justin, TX Direct Lease
Samsung Electronics America, Inc. 552,225 SF 400 Dividend Dr. Coppell, TX Direct Lease
Systemaxz Inc. 489,804 SF 2119 N. I-35 E DeSoto, TX Direct Lease
Petmate 468,300 SF 3201 N. Houston School Rd. Lancaster, TX Direct Lease
IDI Logistics 4,741,533 SF 11 Building Portfolio Sale Dallas-Fort Worth, TX Investment $189,661,320 $40.00 PSF
Granite REIT Holdings 822,550 SF 201 Sunridge Blvd. Wilmer, TX Investment $99,528,550 $121.00 PSF
Global Logistics Properites 494,518 SF 14601 Sovereign Rd. Fort Worth, TX Investment $33,132,706 $67.00 PSF
Cabot Properities, Inc. 289,080 SF 2710 N. Forum Dr. Grand Prairie, TX Investment $23,126,400 $80.00 PSF
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Dallas-Fort Worth’s central U.S. location enables the market to act as an advantageous distribution hub, with quick access to rail, air and over-the-ground truck transportation. The region is a global inland port with two locations capable of large-scale cargo operations: Alliance Global Logistics Hub and the International Inland Port of Dallas. Home to major rail logistics operations for the two primary western U.S. railroads — BNSF Railway Company and Union Pacific Corp. — Dallas-Fort Worth is able to tap into major east-west arteries and provide important links to Mexican markets. By truck, distributors can efficiently move products throughout the central United States, reaching 93% of the population within 48 hours.
Major Logistics Driver: Alliance Global Logistics Hub and International Inland Port of Dallas
The Dallas-Fort Worth industrial market continues to lead the nation in absorption (19 million square feet) and new construction (19.9 million square feet). The key to new construction is that our market is absorbing the equivalent square footage of what is being built. So, what is causing the growing demand for industrial space in Dallas-Fort Worth? Dallas-Fort Worth is the central point in the U.S. for distribution and is considered by foreign and institutional capital to be a safe-haven for investment. Add to that our excellent climate and resulting minimum disruptions to supply chains and you have a “perfect storm” for positive continued growth. All in all, as the economy continues to grow, Dallas-Fort Worth remains well positioned to accommodate occupiers, developers and investors with excellent options.”
Executive Vice President | Dallas
Chris Teesdale, SIOR
New supply of bulk industrial space totaled 19.9 million square feet of completed construction during 2019, marking the third consecutive year of deliveries totaling more than 19 million square feet. A total of 21.7 million square feet remained under construction at the end of 2019, with the majority of that space being built on a speculative basis. Market fundamentals in the metroplex continue to outpace the country. Over the past several years, Dallas-Fort Worth has consistently ranked in the top five metros for job creation in the country. Labor is in abundance and wages are relatively reasonable for a market this size. Despite the uptick in rental rates over the last decade, logistics companies deem it necessary to be centrally located with access to more than 26 million people within 250 miles.
> >
Dallas-Fort Worth’s location, abundance of land and strong labor force continue to make it one of the best big-box markets in the country. This was evident in 2019 as the market set a record for absorption, posting more than 19 million square feet at year-end. Taking rental rates continue an upward trend. Landlords have pushed rates into record territory at $3.91 NNN at the end of 2019. While this is a modest 2.3% increase year over year, in the past five years, rates have increased more than 13%. Investors have taken notice of this trend and — coupled with cap rates of 6.7% — it’s evident that Dallas-Fort Worth is a viable option to place capital.
Record absorption for Dallas-Fort Worth in 2019
NEXT: GREATER PHOENIX
PREVIOUS: COLUMBUS
78 78 78 85 87 90 94 103 112 130
33,516,320 33,516,320 33,516,320 36,652,850 37,629,864 39,360,002 40,986,322 44,590,670 49,936,211 57,068,655
7,731,422 3,773,973 3,309,599 6,770,956 7,667,709 7,255,652 7,892,166 6,938,062 9,191,445 8,985,550
23.1% 11.3% 9.9% 18.5% 20.4% 18.4% 19.3% 15.6% 18.4% 14.8%
4,999,503 6,125,424 2,750,431 1,850,911 1,749,359 2,898,714 6,938,240 4,377,581 3,852,986 1,059,349
3,137,832 3,957,449 464,374 –324,827 80,261 2,142,195 989,806 4,432,172 1,346,280 628,781
$3.86 $3.68 $4.08 $4.14 $4.24 $4.39 $4.51 $4.62 $4.76 $4.95
8.3% 7.4% 5.5% 5.6% 5.0% 6.1% 5.7% 5.0% 4.9% 5.0%
1,148,709 – – 3,136,530 977,014 1,730,138 1,626,320 3,749,466 4,178,963 780,178
– – – 698,853 1,344,038 215,000 1,724,527 2,334,554 1,908,713 2,678,528
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Phoenix expanded its local interstate system, including improvements and expansions to Loop 202 and 303. this, along with its location along I-10, gives the market a significant logistical advantage in reaching the Southwest populace. Rail access is also robust with two transcontinental railroads servicing the area. The Phoenix Sky Harbor Airport is a burgeoning air cargo hub utilized by both FedEx and UPS that recently ranked 18th in the country in total cargo. The Greater Phoenix region’s biggest logistics driver is its populace. The region boasts a growing population and the third-largest labor pool for distribution occupations in the Western U.S. Distribution wages are lower than California and the state is a right to work state. With the increased need for labor because of e-commerce, the region will continue to prosper for the foreseeable future.
Executive Vice President Phoenix
Don MacWilliam
“The Greater Phoenix big-box market offers many options and solid market dynamics. We have a multitude of Class A options with rents 10-12% less than our neighbors in Southern California and Nevada. Labor is abundant, with hourly wages lower than comparative markets in the Southwest U.S. New product continues to be built along I-10 and the new loop freeways, providing a very solid foundation for logistics locally and in the region. These features, along with the growing air cargo capabilities of Sky Harbor Airport, will have occupiers expanding into the region for the foreseeable future.”
Arizona
The Greater Phoenix big-box market remains an attractive option for occupiers and investors because of its proximity to a growing population, a strong workforce base, an expanded and modernized highway system and more attractive rental rates compared to markets in Southern California. Nearly five million people live in the Phoenix metro area — the 12th highest in the U.S. — and this number is expected to grow by more than 8% in the next five years, according the U.S. Census Bureau. Phoenix also has an affordable workforce compared to other industrial markets in the Southwest, with hourly warehouse workers making an average of $14.25 per hour at midyear, much lower than the Inland Empire’s average of $14.70. The Greater Phoenix market was one of the hardest hit by the subprime mortgage collapse and subsequent recession, with overall vacancy rates for big-box product topping out at a whopping 30% in 2009. Much of that vacancy was occupied as the economy improved, dropping to 9.9% in 2012, then escalated as new speculative development increased to coincide with the demand for e-commerce fulfillment centers. The market finished midyear with an overall vacancy rate of 14.8%, 3.7 percentage points lower than the same time a year ago. Big-box vacancies decreased despite a drop in activity at midyear. Only 1.1 million square feet leased in the first half, dropping net absorption to 628,781 square feet. Despite the drop in activity, it looks like Phoenix is in line to post its sixth consecutive year of positive absorption for big-box space. Because of a double-digit vacancy rate, new development decreased at midyear to only 780,000 square feet, giving the market a respite to absorb some of the product on the market. This respite is temporary however, as 2.7 million square feet is under construction, a majority of which is in the 500,000 square feet to 749,999 square feet size range. Despite lower activity, signs point to continued growth in the Greater Phoenix big-box market in the coming quarters. There are a solid number of tenants currently in the market, ranging from e-commerce retailers to 3PLs, to data center occupiers — a growing demand driver in the region. The region will compete with Southern California for new occupiers because of its economic rents, strong labor force, availability of modern product and pro-business environment. Because of this activity there will be upward pressure on taking rents and sale prices, and cap rates will remain low for the foreseeable future.
is the lowest since 2012
14.8% vacancy rate
Ferrero Rocher Chocolate 648,798 SF SWC Indian School & Cotton Ln. Goodyear, AZ Direct Lease
Z Modular 222,000 SF 6205 S. Arizona Ave. Chandler, AZ Direct Lease
States Logistics 211,185 SF 1755 S. 75th Ave. Phoenix, AZ Direct Lease
Dalfen Industrial 418,651 SF 12000 N. 132nd Ave. Surprise, AZ Investment $24,101,738 $57.57 PSF
BH Properties 252,300 SF 19019 N. 59th Ave. Glendale, AZ Investment $26,499,069 $105.03 PSF
Cohen Asset Management 250,043 SF 2200 S. 43rd Ave. Phoenix, AZ Investment $24,679,244 $98.70 PSF
Geodis Logistics 611,320 SF 1 Costco Way Monroe, NJ Renewal
Colony Capital, Inc. 271,176 SF 100 Performance Dr. Mahwah, NJ Investment $61,998,969 $228.63 PSF
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Phoenix expanded its local interstate system, including improvements and expansions, to Loop 202 and 303. This, along with its location along I-10, gives the market a significant logistical advantage in reaching the Southwest populace. Rail access is also robust with two transcontinental railroads servicing the area. The Phoenix Sky Harbor Airport is a burgeoning air cargo hub utilized by both FedEx and UPS, that recently ranked 18th in the country in total cargo. The Greater Phoenix region’s biggest logistics driver is its populace. The region boasts a growing population and the third-largest labor pool for distribution occupations in the Western U.S. Distribution wages are lower than California and the state is a right to work state. With the increased need for labor because of e-commerce, the region will continue to prosper for the foreseeable future.
Major Logistics Driver: Phoenix Sky Harbor Airport
The Phoenix industrial market experienced another banner year in 2019, especially in the big-box sector. We saw many significant regional and national logistics occupiers locating in the metro industrial market, with Amazon leading the way taking more than 3,000,000 square feet in the last six months of 2019 alone. The opening of the Loop 202 freeway at the end of 2019 and the Loop 303 corridor became home to large corporate users taking advantage of excellent freeway access and solid market dynamics. Our supply of labor, availability of big-box product, proximity to Southern California and attractive investor pricing will continue to highlight Phoenix as a Class A location for occupiers and investment dollars as we move into the next decade.”
Executive Vice President | Phoenix
Don macwilliam
In 2019, the big-box market delivered nearly 2.4 million square feet, including two facilities for e-commerce giant, Amazon. The Phoenix big-box market has not delivered a facility greater than 750,000 square feet since Q1 2013, however The HUB at Goodyear — a 790,980-square-foot project — is set to deliver early in 2020. Big-box development has been especially active in the West Valley, but 2019 had the first East Valley project break ground. The Landing 202 — two distribution facilities totaling 604,000 square feet in Mesa, AZ — is projected to deliver during the third quarter of 2020. With the introduction of the West Loop 202 extension in 2019, the East Valley market will soon see additional growth.
Population growth in the greater Phoenix area helped push big-box inventory to grow 5.8% year over year. New construction is putting upward pressure on vacancy as the overall vacancy rate in these properties reached 16.1% at the end of the year. Vacancy has not risen higher than 20%, however, since Q3 2016. The greater Phoenix area continues to attract industrial occupiers. Tenant demand continues to remain steady and indicates continued healthy absorption rates and rent growth. Net occupancy gains for bulk space totaled 121,669 square feet. The infrastructure investment of the Loop 202 extension that connects the Southeast Valley to the West Valley will make the transportation of goods into and throughout the greater Phoenix area more efficient.
Tenant demand remains steady in Phoenix
NEXT: HOUSTON
PREVIOUS: DALLAS-FORT WORTH
111 114 119 129 138 158 176 189 212 225
41,859,415 42,607,191 44,252,409 47,662,096 50,665,358 57,567,774 66,546,045 72,590,947 81,671,430 86,495,811
5,560,079 4,835,642 3,949,235 4,338,532 4,835,529 5,511,720 5,573,359 3,558,537 3,801,322 5,096,695
13.3% 11.3% 8.9% 9.1% 9.5% 9.6% 8.4% 4.9% 4.7% 5.9%
4,255,895 2,994,969 5,171,134 3,736,325 6,311,557 9,260,941 7,398,374 7,474,837 8,104,476 2,024,971
3,113,530 1,472,213 2,531,625 3,020,390 2,506,265 5,900,948 8,916,632 8,059,724 8,837,698 4,690,044
$4.57 $4.56 $4.35 $4.42 $4.46 $4.67 $5.07 $5.39 $5.03 $5.49
7.1% 6.8% 6.6% 6.4% 6.3% 6.0% 6.0% 6.0% 6.1% 6.2%
1,706,616 747,776 1,645,218 3,409,687 3,003,262 6,902,416 8,978,271 6,044,902 9,080,483 4,824,381
747,776 1,641,994 1,576,963 2,426,230 5,071,689 9,757,816 5,770,423 7,407,740 6,868,519 7,344,819
The Port of Houston remains a top demand driver for big-box space in the region. One of the top growth ports for loaded inbound container volumes, the Port of Houston draws on recent infrastructure improvements and two rail yards to funnel product to and from warehouses in the Houston region. Among other factors, the expansion of the Panama Canal should help keep demand strong for industrial product in the market for the foreseeable future. Houston’s air cargo capabilities also continue to grow. The George Bush International Airport is currently the 16th ranked cargo airport in the U.S. Houston’s logistics advantages also include more than 2,000 trains serving the region weekly. Kansas City Southern provides intermodal service through Houston, connecting the American Midwest and Mexico.
Vice President Houston
Ryan Byrd
“Houston’s big-box market continues to grow at an unprecedented pace. The average tenant transaction size has increased, and the market has responded with building configurations to meet the demand. With an increasing number of institutional investors entering the Houston market, industrial land prices continue to set records as developers compete for the remaining development sites. Strong population growth, job growth and a diverse economy have provided Houston with steady leasing activity. There are several users in the market pushing one million square feet, including Coca-Cola and Home Depot, which are currently under construction. These larger users are becoming more common in Houston, and we expect buildings and users to continue the trend in that direction.”
Houston’s booming port and growing population is creating robust interest and increased development for big-box product in the region. More than 24 million people live within 250 miles of Houston and the city’s population is growing at a rate of 1,000 people per week. Large occupancies are keeping vacancy rates low in Houston which finished midyear at 5.9%, a 100-basis-point increase compared with the same time last year. While vacancy rates are low, they did increase because of a much-needed increase in speculative development. Despite an increase in available stock, leasing declined significantly during the first half of 2019 to two million square feet. This drop in new activity is temporary as a plethora of large tenants are currently searching for space. Despite low leasing, occupancy gains remained strong at 4.7 million square feet, as many of the large leases that signed in Q4 2018 took occupancy. Continued positive absorption increased first year taking rents to a record high of $5.49 per square foot per month NNN. Developers have taken notice of the potential of the Houston industrial market, increasing product under construction to 7.3 million square feet. Demand for big-box product in Houston will likely continue for the foreseeable future. The Port of Houston is booming with significant growth in both loaded inbound and outbound container volume. This, along with continued population growth, will increase leasing activity, investor demand, new development and taking rental rates in the coming quarters.
within 250 miles of the market’s core
24 million people live
Home Depot 770,640 SF Grand National Business Park - Fallbrook Dr. Houston, TX Build-to-suit
Plantgistix 337,040 SF Ameriport Business Park - 5623 AmeriPort Pkwy. Houston, TX Direct Lease
Builders FirstSource 275,600 SF Claymoore Business Park - 11711 Clay Rd. Houston, TX Direct Lease
Clarion Partners 601,426 SF 10433 Ella Blvd. Houston, TX Investment $49,316,932 $82.00 PSF
Zurich Alternative Asset Management LLC 554,536 SF 636 Highway 90 Missouri City, TX Investment $48,244,632 $87.00 PSF
Lexington Realty Trust 257,835 SF 10535 Red Bluff Rd. Pasadena, TX Investment NNN, Bulk/Portfolio $27,588,345 $107.00 PSF
STAG TX Holdings, LP 248,750 SF 18727 Kenswick Dr. Humble, TX Investment $29,601,250 $119.00 PSF
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Port Houston’s market strength and strategic location along the 52-mile-long Houston Ship Channel produces a winning combination for business growth and increased industrial development. The economic impact of Port Houston is significant, producing more than 1.35 million jobs and an economic value of $339 billion for Texas. Port Houston generates $5.7 billion in state and local tax revenue annually. Port Houston is recognized as the number one U.S. port in foreign waterborne tonnage and is the number three ranked U.S. port in terms of total foreign cargo value. Having 45% of the Texas market share by tonnage and 96% market share in containers by total TEUs in 2018, it is clear that Port Houston is a key player in this significant statewide recognition. The Port is the largest Gulf Coast container port, handling 52% of U.S. Gulf Coast container traffic in 2019.
Major Logistics Driver: Port Houston
The Houston industrial market has not traditionally been classified as a big-box market in the past, and that hasn’t completely changed. However, the last few years have seen more and more speculative development and build-to-suits of these larger, bulk buildings. Nowhere is this clearer than the West and Far West submarkets, evidenced by occupiers including Igloo, Rooms To Go, Amazon and Academy — all of whom occupy what are termed “mega-distribution centers” (greater than one million square feet). Costco also broke ground in January of 2019 on 150 acres to build what is expected to be a one-million-square-foot facility. This is a new trend in Houston that is likely to continue, albeit at a slower pace as the demand for developable land slowed somewhat in 2019. The market also told us that demand for occupiers to purchase their buildings — as opposed to leasing — increased, driven by lower interest rates and the desire to be located closer in to town. As a result, sellers are getting reasonable prices and that segment remains strong. Cap rates are also extremely low, resulting in an extremely high price per square foot trades on investment sales.”
Vice President | Houston
Kent Willis
Continued positive absorption prompted average rents for bulk industrial space to increase 6.5% year over year to reach $5.09 at year-end. Houston’s bulk industrial leasing activity totaled more than 5.6 million square feet — a good indication that demand for big-box product in Houston will likely continue for the foreseeable future. Houston’s industrial sector is the benefactor of rapid growth in e-commerce and strong port activity, driving the demand for modern bulk space. At the close of the year, more than 12.8 million square feet of bulk development was underway — almost double the construction figures over the prior year. The largest project under construction — a 1.3-million-square-foot build-to-suit distribution warehouse for Medline Industries — is being developed by Clay Development & Construction.
Houston’s overall industrial vacancy rate for big-box facilities increased significantly to 10.6% at the end of 2019 due to a number of bulk facilities that were delivered vacant during the year. A total of nearly 9.6 million square feet was added to the market, of which more than half remained vacant at year-end. As population growth continued in the region, occupier appetite to be located in the energy capital of the world was apparent. Houston’s industrial market posted 2.4 million square feet of occupancy gains in the fourth quarter of 2019, pushing the year-end total to 8.7 million square feet — solidifying its place as one of the top 10 industrial markets in the country. Bulk space absorbed 5.2 million square feet in 2019.
Houston’s bulk industrial market added 9.6 million square feet of new inventory
NEXT: I-4 CORRIDOR
PREVIOUS: GREATER PHOENIX
191 191 191 191 195 198 206 215 224 228
67,215,805 67,215,805 67,215,805 67,215,805 70,636,743 71,748,063 74,698,289 78,435,065 82,187,739 84,007,759
8,567,547 7,491,037 6,008,003 6,122,620 5,090,239 5,098,821 4,718,000 5,903,045 5,011,710 7,308,922
12.7% 11.1% 89.0% 9.1% 7.2% 7.1% 6.3% 7.5% 6.1% 8.7%
1,576,776 4,855,004 2,282,195 3,415,436 3,708,057 3,104,204 5,880,302 6,868,006 5,647,609 1,397,589
–391,173 1,076,510 1,483,034 –114,617 4,453,319 1,102,738 3,331,047 2,551,731 4,644,009 –477,192
$3.74 $3.89 $3.77 $4.03 $4.09 $4.32 $4.44 $4.69 $4.87 $5.07
8.0% 7.3% 9.0% 8.7% 7.0% 6.2% 6.0% 5.8% 6.3% 5.6%
– – – – 3,420,938 1,111,320 2,950,226 3,736,776 3,752,674 1,820,020
– – – 2,403,245 703,920 1,755,713 2,893,270 3,574,474 5,055,016 4,485,693
While many parts of the country struggle with labor shortages, the entire Central Florida region has an employment concentration that exceeds the national average. Both foreign and domestic logistics companies benefit from a large available workforce and industry-focused educational programs, including Polk State Corporate College Supply Chain and Logistics Institute and Florida Polytechnic’s concentration in Material and Supply Chain. Not only is labor readily available in the I-4 Corridor, it is also affordable, with average warehouse worker wages finishing 2018 at $12.96 per hour, $1.00 an hour lower than the national average. The region is home to strong ground and rail freight capabilities including the CSX Integrated Logistics Center (ILC) in Winter Haven. The ILC has also been a major boon to all of Central Florida’s logistics and distribution industry. This centralized transportation hub features a 318-acre terminal adjacent to 930 acres of industrial and business park space slated for use by light industrial facilities and warehouse distribution centers. The region is home to two international airports (Orlando and Tampa), both with growing cargo handling capabilities. The I-4 Ultimate Project is a 21-mile makeover — from west of Kirkman Road in Orange County to east of State Road 434 in Seminole County that will improve truck flow throughout the area.
Executive Managing Director Tampa
Ryan A. Vaught
“Over the past 12 months, there has been a large concern regarding the wave of new supply hitting the market. Leasing velocity in Q2 2019, accompanied by additional LOIs signed or near signing in early Q3 2019, has provided an uptick in optimism that the market will be able to absorb the new development projects yielding elevated bullishness in 2020.”
Florida
Despite a slow start to 2019, the I-4 Corridor industrial market is one of the most dynamic industrial markets in the country. More than 21 million people live within 250 miles of the markets core, making it an ideal location for retailers, wholesalers and 3PLs to locate. Nearby Orlando is also home to a burgeoning millennial population, making the market extremely popular for distribution facilities. While most of the I-4 Corridor’s growth was previously focused on smaller industrial buildings, big-box facilities are being developed at a brisk pace, making it a big-box market to watch in the coming quarters. Big-box activity accelerated in 2016, with more than 5.6 million square feet of new leasing activity — 2017 followed suit with an additional 7.7 million square feet. This nearly 14 million square feet of leasing activity absorbed most of the available big-box stock in the region, lowering new leasing to 5.2 million square feet in 2018. Despite an influx of newly constructed and vacant inventory, leasing has been slow the first half of 2019, with only 1.4 million square feet signed. The overall vacancy rate for big-box product which finished 2018 at a decade low 6.1%, jumped back up to 8.7% at midyear. This increase in vacancy rates does have a silver lining as for the first time in two years there is vacant product larger than 750,000 square feet available to occupy. Investment activity in the region is picking up in 2019, evidenced by many large transactions signed larger than 300,000 square feet. A pickup in investment activity dropped cap rates for big-box facilities in the region to 5.6% in 2019, a number on par with the national average. The I-4 Corridor has all of the demand drivers for a pickup in big-box activity in the coming quarters. Despite a slowdown in activity, the I-4 Corridor will soon take its place as a premier big-box region in the Southeast U.S. Look for occupier interest to increase in the second half of 2019, with taking rents and investment sales continuing to ascend.
$5.07 per square foot
Altadis USA 238,437 SF 2601 Tampa East Blvd. Tampa, FL Renewal
HD Supply Facilities Maintenance 160,450 SF 6850 Firstpark Blvd. Lakeland, FL Move-in
SYNCED BLANK COPY 000,000 SF Address 1 Address 2 Type
Kohlberg Kravis Roberts & Co. 491,920 SF 5300 Allen K. Breed Hwy. Lakeland, FL Investment $35,423,159 $72.01 PSF
ASB 8800 Adamo 368,664 SF 8800-8824 E. Adamo Dr. Tampa, FL Investment $26,300,90 $71.34 PSF
RealOp Investments 364,082 SF 5210 S. 16th Ave. Tampa, FL Investment $16,500,196 $45.32 PSF
American Metals Supply 213,686 SF 10840 Crossroads Commerce Blvd. Tampa, FL Owner User $15,761,479 $73.76 PSF
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While many parts of the country struggle with labor shortages, the entire Central Florida region has an employment concentration that exceeds the national average. Both foreign and domestic logistics companies benefit from a large available workforce and industry-focused educational programs, including Polk State Corporate College Supply Chain and Logistics Institute and Florida Polytechnic’s concentration in Material and Supply Chain. Not only is labor readily available in the I-4 Corridor, it is also affordable, with average warehouse worker wages finishing 2019 at $12.96 per hour, $1.00 an hour lower than the national average. The region is home to strong ground and rail freight capabilities, including the CSX Integrated Logistics Center (ILC) in Winter Haven. The ILC has also been a major boon to Central Florida’s logistics and distribution industry. This centralized transportation hub features a 318-acre terminal adjacent to 930 acres of industrial and business park space slated for use by light industrial facilities and warehouse distribution centers. The region is home to two international airports (Orlando and Tampa) — both with growing cargo handling capabilities. The I-4 Ultimate Project is a 21-mile makeover — from west of Kirkman Road in Orange County to east of State Road 434 in Seminole County that will improve truck flow throughout the area.
Major Logistics Driver: Ample Supply of Available Labor
Central Florida and the I-4 Corridor continue to blossom as a bulk market due to the shift in the Southeastern supply chain, major cities with rapid population growth (Tampa/Orlando), and a favorable business climate that starts in Tallahassee. As a result, new capital sources are flooding to the market and occupiers are making 10-to-20-year decisions to execute upon long- term leases to establish a foothold on the best sites within the region.”
Executive Managing Director | Tampa
Ryan a. vaught
Bulk building design continued to change over the last five years, seeing buildings designed to 36’ clear with two projects planned now being designed to be 40’ clear. Build-to-suit activity has increased with the result of Amazon and Home Depot executing leases for larger than 750,000 square feet while there are RFPs on the street for additional build-to-suits. Vacancy finished the year at 10.1%, relatively unchanged from the end of 2018 when the average was 10.6%. Tenant demand continues to foster enough activity to absorb most of the space being delivered. Absorption in the I-4 Corridor is largely a result of the continued growth of e-commerce, in addition to a reconfiguration of the supply chain, with more occupiers treating Florida as an independent region instead of a subcomponent of the Southeast.
The I-4 Corridor big-box industrial market in Florida, spanning approximately 133 miles from Tampa, through Orlando to Daytona Beach, has experienced a decisive transition of product over the past few years. Nearly 27 million square feet of newly developed bulk industrial space has been added to the market since Q1 2015, with another 2.6 million square feet currently under construction. 2019 was a record year for bulk construction deliveries, with 8.9 million square feet built during the year and more than 10% of the bulk inventory absorbed in 2019. Lakeland, FL in Polk County was the benefactor of the newest product in the I-4 Corridor, with 1.8 million square feet of bulk space delivered.
Record construction and strong absorption figures prevail
NEXT: INDIANAPOLIS
PREVIOUS: HOUSTON
119 121 123 129 138 147 154 168 180 183
61,040,762 62,746,742 63,724,446 67,636,134 72,665,819 78,274,199 81,190,652 88,571,961 94,341,511 95,668,199
7,257,527 3,569,112 2,686,876 4,510,426 5,801,138 10,165,392 5,647,176 6,820,772 7,309,449 6,714,059
11.9% 5.7% 4.2% 6.7% 8.0% 13.0% 7.0% 7.7% 7.7% 7.0%
3,289,528 4,277,694 4,398,979 7,679,871 5,041,144 5,478,249 9,149,081 6,777,995 7,267,201 6,267,299
923,431 5,395,797 1,859,940 2,088,138 3,738,973 1,211,196 6,632,522 6,256,160 5,320,503 2,168,442
$2.48 $2.68 $2.95 $2.86 $3.38 $3.10 $3.33 $3.31 $3.76 $3.62
8.0% 8.1% 8.0% 7.1% 6.8% 6.2% 6.2% 5.9% 5.6% 6.0%
486,624 1,705,980 977,704 3,911,688 5,029,685 5,608,380 2,916,453 7,384,431 5,810,230 1,637,200
1,049,980 – 2,787,558 2,657,271 4,155,250 1,735,569 5,578,939 4,174,405 7,343,610 9,542,397
With access to five interstates — I-65, I-69, I-70, I-74 and I-465 — and five major railroads, Indianapolis’ central location makes it an ideal logistics hub. This advantageous location is the reason FedEx chose to house its second-largest hub at the Indianapolis International Airport. Located less than 20 minutes from downtown Indianapolis, the Indianapolis International Airport is one of the largest cargo centers in the United States, and was recently ranked seventh for total cargo handled in the U.S. As a result of its cargo capabilities, the airport generates more than $4.5 billion for the area's economy each year on average.
Senior Director Indianapolis
Jimmy Cohoat
“If you build it, they will come. This continues to be the theme in Indianapolis, with record construction completions expected in 2019. The increase in supply is dominated by speculative projects, many being leased before the buildings are delivered. Build-to-suit activity remains strong with several high-profile users already in the market adding facilities to their existing operations. Additionally, user activity in the market continues to surge with several requirements expected to sign and occupy space later this year, further driving absorption numbers. Indiana’s appealing tax structure, strong labor quality, low operating costs and business-friendly regulatory environment have and will continue to fuel additional big-box growth.”
Indiana
Indianapolis’ location affords access to nearly 43 million people within 250 miles. The city also has the advantage of being in a pro-business state with numerous tax and financial incentives. Industrial labor is abundant and hourly wages for warehouse workers are below the national average, at $13.70 per hour. Because of this, Indianapolis has become a burgeoning big-box market, with solid leasing, rental rate growth and new development. Activity picked up the first half of 2019, with more than 6.2 million square feet of new big-box-leasing activity, putting the market on pace to have its best year on record. Robust leasing kept absorption positive at 2.2 million square feet, putting the market on track for its 11th consecutive year of positive absorption. Despite strong occupancy gains, new development had a slow start in the first half of 2019, with only 1.6 million square feet completing. This drop in development was an anomaly, as a record 9.5 million square feet was under construction at midyear. Like many emerging big-box markets in the country, the Indianapolis region has a lack of product larger than 750,000 square feet despite increased demand from e-commerce occupiers. At year-end, only two buildings in this size range were fully vacant, but thankfully, 3.1 million square feet of product in this size range is under construction and will bring much needed inventory in the coming quarters. The Indianapolis market is set up for continued growth in the coming quarters. Taking rents for big-box finished midyear at $3.62 per square foot per year, and while this mark looks to rise in the coming quarters, big-box rents in the region will still remain more economical compared with nearby core markets. Occupiers will also choose Indianapolis at a greater pace compared with other Midwest markets because of its strong labor, pro-business environment and plethora of logistics advantages. All of this means robust leasing, positive absorption, more development and more investor interest in the region for the foreseeable future.
under construction is an all-time record
9.5 million square feet
PepsiCo 912,522 SF 5510 Exploration Dr. Indianapolis, IN Direct Lease
Radial 690,702 SF 1111 E. 56th St. Brownsburg, IN Direct Lease
Geodis Logistics 602,073 SF 1716 Innovation Dr. Clayton, IN Direct Lease
Industrial Logistics Properties Trust 1,036,000 SF 4255 Anson Blvd. Whitestown, IN Investment $72,250,650 $69.74 PSF
Industrial Logistics Properties Trust 962,500 SF 945 Monument Dr. Lebanon, IN Investment $51,301,250 $53.30 PSF
Industrial Logistics Properties Trust 804,586 SF 2801 Airwest Blvd. Plainfield, IN Investment $42,248,811 $52.51 PSF
Industrial Logistics Properties Trust 514,327 SF 9215 Pendleton Pike Indianapolis, IN Investment $43,501,778 $84.58 PSF
Mastin & Cain Properties 511,680 SF 764 N. Graham Rd. Greenwood, IN Direct Lease
3
48
111
Indiana’s reputation as the “Crossroads of America” is a moniker highlighted by the strength of the logistics and transit business through its roads and highways. The state is the national leader in pass-through highways, has the shortest distance in the nation to the median center of U.S. population, and is home to the second-largest FedEx air hub in the world. The state government has allocated more than $12 billion and continues to invest in construction and preservation of this key infrastructure. Logistics operations and developers look to Indiana’s centrality, highway infrastructure, greenfield development opportunities and business-friendly environment as reasons to locate operations in the area.
Major Logistics Driver: Interstate System/Centrality
Indianapolis continues to be a dominant player in industrial real estate. We are accustomed to steady growth, but 2019 surpassed previous records when more than 8.2 million square feet of big-box space was constructed. As absorption hit historic levels, developers took down land positions and kicked off another 30 projects in the greater Indianapolis MSA. Many of our 3PL and e-commerce clients are increasing their local presence, with Indianapolis generally making the short list for multi-market searches for new operations. Our overall fundamentals remain stronger than ever, setting up the Indianapolis market for another strong year ahead.”
Senior Vice President | Indianapolis
Andrea Hopper
Rental rates are ticking up steadily across all size tranches — up 18.7% overall in the last two years. Overall rental rates closed the year at $3.93 per square foot. Investors are seizing on this strong and active sector of the real estate market as cap rates are being compressed to record lows. At the end of 2019, cap rates for the Indianapolis market stood at 5.6%. With inventory surpassing 100 million square feet, developers are expanding the boundaries of the Indianapolis MSA as they seek new greenfield opportunities for big-box development. At year-end, two speculative facilities greater than 750,000 square feet were under construction, to add to the limited space available in this size range.
The Indianapolis big-box market absorbed a record-high 8.4 million square feet of net absorption in 2019 (a 58% increase over 2018), surpassing expectations after averaging 6.1 million square feet in the previous three years. The state’s pro-business environment lends itself to increased interest from bulk occupiers. Despite the completion of 5.5 million square feet of speculative construction projects during the fourth quarter, big-box vacancy dipped to 6.9% by the end of the year — the lowest vacancy rate since year-end 2013. A total of 8.2 million square feet of bulk development was completed during the year. An additional 10.9 million square feet of projects remained under construction moving into 2020, as developers hope to capitalize on the central Indiana industrial market’s momentum.
Indianapolis industrial market boasts record year
NEXT: INLAND EMPIRE
PREVIOUS: I-4 CORRIDOR
464 467 494 530 551 588 584 609 646 658
210,254,000 213,200,000 227,645,000 249,632,000 263,974,000 267,612,000 284,593,000 298,844,000 320,088,000 325,599,700
16,736,218 11,512,800 10,319,500 12,205,000 14,888,134 14,986,272 15,083,429 16,021,701 15,628,786 15,046,589
8.0% 5.4% 4.5% 4.9% – 5.6% 5.3% 5.0% 4.8% 3.9%
16,314,000 18,136,000 15,832,000 15,767,000 21,468,000 27,178,000 37,564,000 27,244,376 34,800,000 14,659,000
11,897,000 10,678,000 3,600,000 10,640,000 12,168,000 17,374,000 17,883,400 15,706,700 21,716,000 7,302,000
$3.36 $3.60 $3.72 $3.96 $4.32 $4.56 $4.80 $4.92 $5.23 $6.12
6.8% 6.2% 5.7% 5.2% 5.4% 5.2% 5.0% 4.8% 4.5% 4.3%
667,000 2,946,000 14,445,000 21,987,000 14,342,000 3,638,000 16,981,000 14,251,000 21,244,000 5,511,000
– 2,763,000 2,100,000 16,049,000 14,648,000 14,717,000 15,606,000 18,575,203 19,235,000 22,062,000
The Inland Empire offers a plethora of logistics advantages, including close proximity to the two largest seaports in North America: the Port of Los Angeles and the Port of Long Beach. The two ports combine to handle more than half of the loaded inbound container volume entering the United States and remain one of the top demand drivers of industrial space in the Inland Empire. The region also boasts access to two interstate highways (I-10 and I-15), offering direct transportation across the east and north United States. In addition, the UPS Regional Air Hub at Ontario International Airport serves customers throughout the western United States, Hawaii and Canada. The Ontario International Airport continues its cargo handling capabilities and is currently ranked the #12 cargo airport in the United States.
Executive Vice President Inland Empire
Mark Zorn, SIOR
“Industrial demand remains constant in the Inland Empire with average rental rates up significantly year over year. 3PLs have been the top occupier of big-box space in 2019, followed by retailers/wholesalers. YTD construction activity continues to be robust with about 30% of that BTS activity. Developers and capital continue to view the future market in a positive light which continues to push land consumption to new levels. Land Prices have risen 25% over the past 12 months along with the cost of construction driving all in building values to new peak level pricing."
California
The Inland Empire has cemented itself as the top big-box market in North America, and for good reason. At just over 325 million square feet, the Inland Empire big-box market is the largest in North America. With more than 28 million people within 250 miles of its core and a strong labor force, the Inland Empire is a leader for e-commerce distribution. This is evidenced by the more than 10 million square feet that Amazon.com occupies in the region. Not only is the Inland Empire the largest big-box market, it is also the most dynamic. Big-box occupiers continue to move into or expand within the region at a record clip, leading to robust amounts of new activity at midyear. 14.6 million square feet of big-box product leased the first half of 2019 — the most for any market in North America. This new leasing pushed overall net absorption up to 7.3 million square feet and dropped the overall vacancy rate to a record low 3.9%. One of the Inland Empire’s top advantages is the amount of land available for development, especially in the Inland Empire East. New development dropped in the first half of 2019 to 5.5 million square feet but the pace of new development will increase significantly with a record 22.1 million square feet under construction at midyear. Solid activity, especially in new Class A product continues to put upward pressure on taking lease rates, which finished midyear at $6.12 per square foot per year NNN, the highest on record. While in previous cycles, the record high rents would have been a sign of a decline in demand, this is not the case now. Since occupiers need to cut transportation costs (the highest cost in the supply chain) and get products to consumers as quickly as possible, the record high rents are less of an issue. All signs point to continued growth for the Inland Empire big-box market in the coming quarters. Tenants in the market remain robust and should be enough to occupy the development currently in the pipeline and keep vacancy rates at all-time lows. Investors will continue to try to enter and expand within the market, driving up sales prices and keeping cap rates well below the 5% range for the foreseeable future.
of leasing activity is the most in North America
14.7 million square feet
Kimberly Clark 1,180,900 SF 4815 Hellman Ave. Ontario, CA Direct Lease
DMSI 1,109,400 SF 17350 Perris Blvd. Moreno Valley, CA Direct Lease
Amazon.com 1,000,000 SF 20901 Krameria Ave. Riverside, CA Direct Lease
Exeter Property 806,300 SF 6227 Cajon Blvd. San Bernardino, CA Investor $97,562,300 $121.00 PSF
Sares-Regis Group 759,300 SF 3100 Milliken Ave. Eastvale, CA Investor $87,319,500 $115.00 PSF
Northwest Mutual 752,600 SF 5885 Sierra Ave. Fontana, CA Investor $106,869,200 $142.00 PSF
Nissan 620,000 SF 21800 Authority Way Riverside, CA Owner User $78,740,000 $127.00 PSF
Burlington Coat Factory 800,400 SF 27582 Pioneer Ave. Redlands, CA Renewal
114
135
432
The Inland Empire is a vital link on the global supply chain, connecting the United States with the rest of the world via the twin ports of Los Angeles and Long Beach. These ports handle approximately 40% of all inbound cargo into the United States. In addition, the Inland Empire is located within one of the most heavily populated regions of the United States, serving as a vital distribution hub for growing e-commerce sales.
Major Logistics Driver: Twin Ports, Population, Trade
The Inland Empire remains the most desirable industrial market in North America for both tenants and investors. For industrial users, the Inland Empire is a slam dunk, located at the nexus of the largest and second largest industrial port complex in North America, and is also strategically located within the second most populous metropolitan area in the United States. For investors, there is a serious lack of developable land in this region and very strong tenant demand from major industrial users who are among the best capitalized companies in the world.”
Executive Vice President | Inland Empire
Cap rates continued to compress and dropped to 4.3%, as investor appetite for fully-leased assets remained high. Due to the present climate, risk will be repriced, but demand will remain strong for Class A assets in irreplaceable prime markets. Economic uncertainty will continue to lead to a strengthening of the dollar relative to foreign currencies. This makes imports relatively cheaper and bodes well for import dependent regions such as the Inland Empire once international trade strengthens. The Inland Empire retains its competitive advantage as industrial users continue to upgrade their supply chain. This is especially true for e-commerce companies where turnaround time is of the utmost importance.
The Inland Empire industrial market remains one of the most dynamic markets in North America. Bulk occupiers continue to flock to the region, as evidenced by the record-low vacancy rate of 4% at the end of 2019. Demand for bulk space exceeds existing supply, with a larger share of net absorption taking place in newly constructed projects. In bulk industrial space alone, a total of 23.8 million square feet of occupancy gains was recorded — another record for the Inland Empire. Construction activity has tapered off the last few quarters as land assemblages have become harder to obtain due to skyrocketing land prices. At year-end, just 14 million square feet of big-box space was under development, the lowest amount recorded since 2012.
Record low vacancies at decade’s end
NEXT: KANSAS CITY
PREVIOUS: INDIANAPOLIS
56 56 57 58 66 70 83 87 96 100
22,978,570 22,978,570 23,328,570 24,150,233 27,246,879 29,293,448 35,558,261 39,014,106 41,929,018 43,569,637
690,228 676,466 414,695 1,034,054 2,045,991 1,445,305 4,723,137 4,643,562 3,705,804 4,545,065
3.0% 2.9% 1.8% 4.3% 7.5% 4.9% 13.3% 11.9% 8.8% 10.4%
826,146 1,435,309 2,238,385 2,022,897 2,142,327 2,258,402 3,703,369 3,006,569 5,251,423 1,182,447
541,754 13,762 611,771 202,304 2,084,709 2,647,255 2,968,336 3,343,712 3,672,198 816,477
$3.85 $3.85 $3.71 $4.11 $4.05 $4.14 $4.24 $4.25 $4.19 $4.17
8.8% – 7.7% 6.9% 7.0% 7.6% 6.3% – 6.2% –
– – 350,000 821,663 3,096,646 2,046,569 8,655,986 4,959,713 3,681,233 1,640,619
– 350,000 821,663 1,961,624 2,443,448 5,427,032 7,891,565 3,535,661 6,202,004 4,973,604
Kansas City is one of the most logistics-friendly industrial markets in the country. Its ground, air and rail offerings rival all other markets in the U.S. Logistics Park Kansas City (LPKC) continued to grow and attract tenants at an unprecedented pace. The park is served by BNSF Railway and continues to show the growing demand for occupiers to be near inland ports with a capacity to hold 17 million square feet of industrial buildings. There are more than seven million square feet of distribution facilities at LPKC, with speculative and build-to-suit opportunities available. In addition to its inland port and substantial rail capabilities, Kansas City is home to a growing air cargo operation. While the Kansas City International Airport only ranks 36th in total cargo, it is one of the fastest growing cargo airports in the country, showcasing the rising distribution importance of the market. Four cargo companies operate from the airport including DB Schenker, DHL, FedEx and UPS.
President Kansas City
Ed Elder
“The Kansas City industrial market continues to perform well, as distribution and e-commerce-related activity remain the key drivers of growth locally. Kansas City continues to emerge as a key national industrial market, driven by the explosion of growth related to distribution, e-commerce activity and supply chain developments. Occupiers continue to lease regional big-box facilities, as well as final-mile distribution centers in strategically located markets around the nation, and Kansas City is well positioned for future growth in terms of geography and infrastructure.”
Missouri
With just under 44 million square feet of big-box real estate, Kansas City is the smallest market showcased in this report. While the region is much smaller than the core markets, its logistics advantages provide a wealth of opportunity for both occupiers and developers. Kansas City’s geography provides a level of access to consumers that is difficult to match in North America. Like many emerging markets, a lack of available product larger than 500,000 square feet lowered new leasing activity in the first half of 2019, to 1.2 million square feet. There was a direct correlation in the drop in leasing activity and a decline in new construction, as only 1.6 million square feet completed the first half of 2019. Despite a drop in activity, net absorption was positive for the first half of 2019 and looks to be on track to finish its 10th consecutive year of positive net absorption by year-end. Despite a lower amount of speculative big-box development, vacancy rates increased at midyear by 10.4% due to move outs in older Class B product. Despite a rise in vacancies, developers realize there is a lack of new Class A product on the market, as nearly five million square feet is currently under construction, a majority of which is larger than 500,000 square feet. While new construction will significantly increase existing product on the market in the second half of 2019, much of this space should lease quickly. This should actually lower vacancy rates in the coming quarters. The market continues to do well with all occupier types but showed the most growth in the food and beverage sector in the first half of 2019, and with the market’s central location, demand from this occupier type will continue for the foreseeable future.
is one of the fastest growing cargo airports in the U.S.
Kansas City International Airport
Hostess 765,000 SF Logistics Park KC Edgerton, KS Direct Lease
Niagara Bottling 426,359 SF CenterPoint Intermodal Kansas City, MO Direct Lease
Rogers Sporting Goods 202,800 SF KCI Logistics III Kansas City, MO Direct Lease
Schafer Richardson 499,144 SF 14100 Botts Kansas City, MO Investment $18,897,59 $37.86 PSF
Jones Development 311,000 SF 500 Sumner Way Gardner, KS Investment $4,354,000 $14.00 PSF
10
78
Logistics Park Kansas City (LPKC) — the new BNSF facility located in Edgerton — encompasses 433 acres and has been designed to accommodate the growing demands of freight rail transportation in the Kansas City region. Approximately 1,300 acres of land is being currently being developed by NorthPoint, adjacent to the BNSF facility. Since 2013, LPKC delivered more than 11 million square feet of industrial product since 2013, with additional projects currently under construction. In total, the Kansas City metro area has delivered more than 40 million square feet of industrial space since 2012.
Major Logistics Driver: Logistics Park Kansas City
The Kansas City market continues to be a thriving industrial market as a result of its geographically — centralized location, superior infrastructure and business-friendly foreign trade zone program. Kansas City is home to the largest rail center in the United States by tonnage and is ideally located at the crossroads of the East-to-West corridor and the route from Mexico to Canada. Multiple intermodal facilities and infrastructure continue to spur development activity within the market. Four interstate systems converge upon Kansas City, resulting in more freeway-lane miles per capita than any other U.S. city, while allowing goods to be delivered to 85% of the nation’s population within two days.”
President | Kansas City
Ed elder
A total of nearly 5.8 million square feet of big-box space remained under construction at year-end, surpassing the prior year’s total of 2.2 million square feet. Big-box facilities under construction included 3.3 million square feet of speculative development that was not pre-leased at year-end. Rental rates of bulk facilities remained relatively flat compared to the prior year. Expect rates on bulk spaces to remain relatively stagnant — if not slightly decline — while smaller industrial buildings will continue to raise rates successfully. The upcoming years are expected to experience additional demand and positive net absorption as the Kansas City market remains a benefactor due to its ideal geography, infrastructure and steady supply of speculative product, which caters to the needs and timing requirements of 3PL and e-commerce growth.
While the Kansas City region is much smaller than the core markets mentioned in this report, its logistics advantages provide a wealth of opportunity for both occupiers and developers. The Kansas City industrial market continued to exhibit robust activity throughout 2019 and vacancy declined to 6.1% at year-end, down 30 basis points from one year ago. Big-box vacancy, however, did not fare as well and posted a 90-basis-point increase over the prior year, due to a number of speculative projects that delivered during the year. In 2019, bulk facilities in the Kansas City metro recorded nearly four million square feet of positive net absorption, nearly double the amount recorded one year ago. This is in contrast to the overall market which saw year-over-year absorption levels fall slightly below the previous year’s total. The Kansas City industrial market ended 2019 with the delivery of more than five million square feet of total industrial product, just shy of last year’s total of 5.1 million square feet. Similar to previous years, Johnson County delivered the bulk of the new product throughout 2019, however construction activity can be seen across every submarket within the Kansas City metro.
Robust activity continued for Kansas City industrial space
NEXT: MEMPHIS
PREVIOUS: INLAND EMPIRE
144 145 147 151 156 161 165 172 177 183
78,710,081 79,565,959 80,445,619 82,945,243 86,132,039 90,651,932 92,433,445 97,319,115 100,461,595 103,896,590
8,905,972 7,231,994 7,630,769 8,196,869 8,052,715 8,646,048 5,899,418 5,532,381 7,754,878 4,667,076
11.3% 9.1% 9.5% 9.9% 9.3% 9.5% 6.4% 5.7% 7.7% 4.5%
2,926,865 1,301,263 3,165,842 635,427 1,026,385 1,126,409 4,657,270 6,234,922 4,782,783 4,114,542
552,143 2,511,076 3,165,842 1,029,809 200,000 2,274,594 1,401,761 1,832,407 –14,594 1,593,223
$2.65 $2.85 $2.95 $3.10 $2.80 $2.90 $3.10 $3.25 $3.50 $3.50
– 8.6% 7.8% 8.5% 7.5% 7.5% 6.0% 6.0% 6.0% 5.8%
– 855,878 234,600 1,369,892 2,075,842 2,413,241 1,781,513 2,831,630 3,142,480 –
– 879,660 2,453,040 2,322,206 3,807,052 1,506,113 3,734,920 4,893,984 3,081,340 6,991,584
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Memphis International Airport is recognized as one of the world's busiest air cargo airports. Due to its popularity among passengers (140,000 each month on average) and logistics professionals alike, the airport has an estimated annual economic impact of $23.3 billion and affects 25% of the city's jobs, according to the University of Memphis. With its headquarters in Memphis, FedEx represents roughly 98% of the airport's total cargo and handles more than 180,000 packages every hour at its World Hub, which is located at the airport. Being near this hub is key for e-commerce distribution and will continue to draw occupiers to the region for the foreseeable future. The International Port of Memphis is the second-largest inland port on the shallow draft portion of the Mississippi River and the fifth-largest inland port in the United States. The Port is key to feeding product to Memphis’ large rail network. In fact, Memphis is the third-largest rail center in the U.S. behind Chicago and St. Louis and home to nine fully operational rail yards with a total current container capacity of more than two million annual lifts.
Senior Vice President & Principal Memphis Region
Tim Mashburn
“The first half of 2019 has seen the Memphis industrial market continue its run of robust speculative big-box growth with seven developers under construction with just under five million square feet at midyear. Approximately 33% of the product has been leased or is under lease negotiation during construction, coupled with another two million square feet of build-to-suit projects. As vacancy has decreased, rent growth has accelerated and opened up new areas of development with the completion of I-269 (outer loop around Memphis). With the continued velocity of users in the market, the speculative availability will likely diminish before year-end and spur continued new development into 2020.”
Tennessee
Memphis is an international distribution hub with a transportation and logistics infrastructure that is second to none. Because of this, occupiers and developers alike are increasing their big-box footprint here. Despite continued demand, Memphis remains the most economical big-box market in North America, with taking rents averaging only $3.50 per square foot per year NNN at midyear. At midyear, 4.1 million square feet of big-box product leased in Memphis, nearly equaling the total in all 2018. This significant amount of activity coupled with no big-box construction completions lowered the overall vacancy rate to a decade low 4.5%. The lack of new construction is temporary however as a record seven million square feet is under construction, a majority of which is in product larger than 500,000 square feet. Not only are institutional investors building more in the region, they are also increasing their portfolios by purchasing existing stock. Sealy and Company and Blackrock both made significant investments in the region, this activity coupled with robust market fundamentals lowered the average cap rate in the region to a decade low 5.8% at midyear. As fundamentals continue to improve in Memphis, look for institutional capital to flow into the region as a stronger clip in the second half of the year. Despite a decade low vacancy rate, the future looks bright for the Memphis big-box market in the coming quarters. Many tenants are in the market and this looks to continue into the second half of the year as occupiers increase their presence near Memphis’ important logistics hubs. Because of this, look for newly constructed space to quickly absorb, keeping vacancy rates stable and putting rents on an upward trajectory for the foreseeable future.
under construction is the most in over a decade
6.9 million square feet
Kellogg 767,000 SF Gateway Global Logistics Center Byhalia, MS Direct Lease
Ceva Logistics 648,750 SF 5166 Pleasant Hill, Southpoint Memphis, TN Renewal
Protective Industrial Products 595,612 SF 8331 Frontage Rd. I-22 Logistics Center Olive Branch, MS Direct Lease
Sealy & Company 1,106,876 SF 7755 Polk Ln. Williams-Sonoma Bldg. Olive Branch, MS Investment $48,005,212 $43.37 PSF
Ozark Automotive 581,475 SF 1241 Commerce Pkwy. DeSoto 55 Logistics Center Southaven, MS Owner User $27,625,877 $47.51 PSF
Blackstone Group 212,098 SF 4020 Quest Way Memphis Distribution Center Memphis, TN Investment $5,646,048 $26.62 PSF
Sealy & Company 207,472 SF 5400 Distriplex Farms Distriplex Farms Memphis, TN Investment $6,765,662 $32.61 PSF
Amazon 554,040 SF 191 Norfolk Southern Way Gateway Global Logistics Center Byhalia, MS Direct Lease
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Memphis International Airport is recognized as one of the world’s busiest air cargo airports. Due to its popularity among passengers (140,000 each month on average) and logistics professionals alike, the airport has an estimated annual economic impact of $23.3 billion and affects 25% of the city’s jobs, according to the University of Memphis. With its headquarters in Memphis, FedEx represents roughly 98% of the airport’s total cargo and handles more than 180,000 packages every hour at its World Hub, which is located at the airport. Being near this hub is key for e-commerce distribution and will continue to draw occupiers to the region for the foreseeable future. The International Port of Memphis is the second-largest inland port on the shallow draft portion of the Mississippi River and the fifth-largest inland port in the United States. The Port is key to feeding product to Memphis’ large rail network. In fact, Memphis is the third-largest rail center in the U.S. behind Chicago and St. Louis and home to nine fully operational rail yards, with a total current container capacity of more than two million annual lifts.
Major Logistics Driver: Memphis International Airport
The Memphis market continued its strong leasing activity in 2019 with nearly nine million square feet of Class A deals executed for the year, drastically reducing the number of large box availabilities. Although size ranges varied, there were six transactions ranging from 650,000 to 1,000,000 square feet, continuing the trend from 2008 that ‘bigger is better.’ This activity has pushed vacancy rates to historically low levels and continued to drive rent growth. With limited Class A big-box options available, developers are rushing to put new Class A speculative product on the ground with nearly eight million square feet planned or under construction for 2020.”
CEO, President & Principal, Asset Services | Memphis
Brad Kornegay
The Memphis industrial market signed 20 new Class A industrial leases greater than 200,000 square feet in 2019, totaling 8.9 million square feet. Manufacturing companies took a bulk of the space (37.5%) followed by 3PLs taking 26.6% of the bulk space. Build-to-suit activity hit an all-time record with seven projects underway at year-end, totaling 3.9 million square feet. This includes large occupiers like Amazon, who recently executed a 1.1 million square foot lease, with another 2.1-million-square-foot multi-story fulfillment center scheduled to break ground during the first part of 2020. The DeSoto and Marshall County submarkets remain the choice areas for bulk, big-box tenants. Proposed speculative construction is expected to break ground early in 2020 with six developers planning large projects.
Occupiers and developers continued to increase their footprint in the Memphis area with more than 3.1 million square feet of big-box delivery recorded in 2019. Cooper Tire & Rubber Company, Kellogg’s and KRONE all occupied new bulk space during the year. Developers are scheduled to complete 15 buildings totaling 7.5 million square feet by the end of 2020 — 11 of which are speculative projects. Additionally — barring any delays — 4.1 million square feet of big-box speculative construction is scheduled to be delivered across eight buildings during the first quarter of 2020, with 32% leased in 2019, prior to completion. Big-box vacancy ended the year 130 basis points lower than the prior year and measured 4.6%. Tenants in the market increasingly look to grow their presence near Memphis’ important logistics hubs.
Fast-paced industrial development at a new high
NEXT: NORTHERN CALIFORNIA
PREVIOUS: KANSAS CITY
170 171 173 174 178 184 192 206 227 232
68,783,402 69,988,677 70,531,230 72,038,679 73,707,317 76,810,059 81,370,181 88,533,174 98,054,253 100,243,557
8,706,545 7,507,925 7,262,915 7,987,237 7,219,271 4,783,860 4,306,708 6,397,531 7,223,064 7,584,204
12.7% 10.7% 10.3% 11.1% 9.8% 6.2% 5.3% 7.2% 7.4% 7.6%
3,512,862 5,750,290 4,772,877 3,621,946 5,601,797 7,105,145 5,266,954 8,748,462 10,988,588 4,444,109
302,640 2,403,895 787,563 783,127 1,645,066 4,714,293 3,093,067 4,764,626 9,771,986 2,809,644
$5.74 $5.20 $5.49 $5.26 $5.55 $5.99 $5.42 $5.73 $6.26 $6.42
5.5% 5.3% 5.2% 4.5% 4.1% 5.8% 4.3% 3.9% 4.1% 3.6%
– – 200,022 1,017,353 1,668,638 2,780,177 4,964,400 6,896,404 9,521,079 2,374,497
– 200,022 1,017,353 1,418,638 3,772,861 4,394,847 6,655,524 9,065,336 9,376,480 8,691,372
24
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Northern California is home to both the Port of Oakland and the Port of Stockton. The Port of Oakland is a world-class international cargo transportation and distribution hub. Located on the mainland shore of San Francisco Bay, Oakland was among the first ports globally to specialize in the intermodal container operations that has revolutionized international trade and stimulated the global economy. The Port of Stockton is located in the San Joaquin Valley and is situated near four major freeways and two transcontinental railroads. Occupiers of big-box space in Northern California can also take advantage of four cargo airports including Oakland International Airport — the 11th largest cargo airport in the U.S. — San Francisco International Airport, San Jose International Airport and Sacramento’s Mather Airport — a growing air freight hub in Northern California.
Executive Vice President Oakland
Greig Lagomarsino, SIOR
“The Northern California industrial market continues to benefit from strong demand from a wide range of users — many of whom are servicing the booming local economy and strong businesses expanding their e-commerce platforms. With vacancy rates throughout the region in the low-to-mid-single-digit range, new speculative development is underway in virtually every submarket. Rising costs of construction, tight labor markets and rising land prices continue to put pressure on new development yields.”
Northern
Even though Northern California is more widely known as a key hub for the tech industry, the region is becoming a major big-box industrial market. Demand for big-box product has exploded due to the rise of e-commerce, as occupiers scramble to service the growing young population in the area. Northern California is really a tale of three markets, the first of which is the East Bay — a mature market near the Port of Oakland. Vacancy rates remain relatively low, with record-high taking rents in the market. Because of land constraints in the Oakland area, big-box development has shifted to the growing Stockton/San Joaquin County region, where just over 90% of new construction and all the top transactions were completed. While a majority of the big-box development and activity is in Stockton/San Joaquin County, Sacramento is becoming an emerging big-box market on its own. Occupiers and developers are looking at the market as a big-box alternative because of its ample and affordable labor. Demand and taking rents continue to ascend in Northern California. A solid 4.4 million square feet leased in Northern California, keeping net absorption positive at 2.8 million square feet. Taking rents finished midyear at an all-time high at $6.42 per square foot per year NNN. Taking rents fluctuate significantly depending on the market the building is located, however. East Bay taking rents finished midyear at $9.30 per square foot per year, while Stockton and Sacramento produce much more economic taking rents of $6.12 per square foot per year and $6.24 per square foot per year NNN, respectively. As the region continues to grow, big-box product demand will likely increase, leading to continued new development, strong leasing, robust investment and continued taking rent growth. Stockton/San Joaquin County will continue to lead the way in new speculative and build-to-suit development, while Sacramento will also be viewed as a viable alternative. While East Bay is definitely an infill market, the needs of occupiers to be near the Port of Oakland and San Francisco could lead to some redevelopment and/or construction of multistory warehousing.
$6.42 per square foot
Tesla 870,294 SF 17100 Murphy Pkwy. Lathrop, CA Direct Lease
Katerra 567,870 SF Northeast Industrial Area Tracy, CA Build-to-suit
Best Logistics 530,752 SF 340 Port Rd., Bldg 22 Stockton, CA Direct Lease
Bentall Kennedy 1,122,341 SF 4532 Newcastle Rd. Stockton, CA Investment $105,298,033 $93.82 PSF
Invesco 861,000 SF 2920 & 2950 Cordelia Rd. Fairfield, CA Investment $99,996,540 $116.14 PSF
LBA Logistics 624,356 SF 3771 Channel Dr. West Sacramento, CA Investment $39,300,000 $62.94 PSF
Dermody Properties 655,976 SF 1624 Army Ct. Stockton, CA Investment $35,422,704 $53.77 PSF
Prism Logistics 443,640 SF 1030 Runway Dr. Stockton, CA Direct Lease
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The greater Bay Area is home to the Port of Oakland — a world-class international cargo transportation and distribution hub. Located on the mainland shore of San Francisco Bay, Oakland was among the first ports globally to specialize in the intermodal container operations that has revolutionized international trade and stimulated the global economy. It is situated near four major freeways and two transcontinental railroads. Occupiers of big-box space in the greater Bay Area can also take advantage of three cargo airports including Oakland International Airport — the 11th largest cargo airport in the U.S. — San Francisco International Airport and San Jose International Airport.
Major Logistics Driver: Port of Oakland
The greater Bay Area industrial market continues to benefit from strong demand from a wide range of users — many of whom are servicing the booming local economy and strong businesses expanding their e-commerce platforms. Home improvement, food industries and technology are also big drivers for demand of industrial space in the region. With vacancy rates throughout the region in the low-single-digit range, new speculative development is underway in virtually every submarket. Most new projects are being preleased prior to completion. Rising costs of construction, tight labor markets and rising land prices continue to put pressure on new development yields.”
Executive Vice President | Oakland
greig lagomarsino, SIOR
A total of 8.8 million square feet was under development at the close of the year, with nearly half of all projects concentrated in the Central Valley/Stockton area. Historically, nearly all big-box speculative developments have been leased prior to completion over the last four years, a positive indication that vacancy should remain low in the coming year, despite the addition of speculative product to the market. Taking rents ended the year at an all-time high of $7.84 per square foot per year NNN. However, taking rents fluctuate significantly depending on the market the building is located. The greater Bay Area taking rents finished year-end at $11.16 per square foot per year, while Stockton and Sacramento produce much more economic taking rents of $6.00 per square foot per year and $6.12 per square foot per year NNN, respectively.
The Northern California market consists of three distinct areas: East Bay — a mature market near the Port of Oakland — the Stockton/San Joaquin County area — an area with fewer land constraints, and Sacramento — an emerging big-box market. E-commerce fueled demand for bulk product in the Northern California industrial market as occupiers race to service the growing young population in the area. Amazon signed approximately five million square feet of transactions in the greater Bay Area over the last year, with roughly 2.5 million square feet signed in the I-80/880 corridor.
Big-box activity continued to grow in Northern California
NEXT: NORTHERN-CENTRAL NEW JERSEY
PREVIOUS: MEMPHIS
177 179 181 184 198 202 210 225 248 256
76,306,247 76,789,422 77,259,272 78,812,822 85,907,606 87,650,838 91,097,705 97,709,134 108,897,210 113,179,401
10,223,808 6,875,435 4,481,869 4,157,431 6,826,835 6,655,480 3,294,054 2,302,766 3,283,445 3,002,492
13.4% 9.0% 5.8% 5.3% 7.9% 7.6% 3.6% 2.4% 3.0% 2.7%
8,997,079 10,355,470 9,386,313 8,059,956 11,021,790 11,270,655 12,891,551 11,115,522 13,025,351 9,607,871
3,168,916 3,831,548 2,863,416 1,877,988 4,425,380 1,914,587 6,808,293 7,602,717 10,207,397 4,373,658
$4.62 $4.09 $4.56 $4.94 $4.65 $5.02 $7.27 $6.52 $8.17 $7.57
8.3% 6.9% 5.1% 6.5% 7.5% – 5.2% 5.1% 6.1% –
269,204 483,175 469,850 1,553,550 7,094,784 1,743,232 2,785,637 6,611,429 11,188,076 4,282,191
483,175 243,750 1,890,658 5,297,857 2,058,621 3,006,520 8,617,360 17,484,505 8,530,807 7,230,673
32
8
182
The Northern-Central New Jersey market is home to the busiest seaport on the East Coast of the United States — the Port of New York and New Jersey — which remains as one of the top demand drivers for industrial real estate in the region. Of all the U.S. ports, the Port of New York and New Jersey is best positioned to take advantage of the increased imports that have resulted from the expanded Panama Canal. The raising of the Bayonne Bridge to accommodate Post-Panamax ships have keep import volumes for the Port strong despite the current disruptions in global trade. The region’s logistics advantages go beyond the sea with many interstate highways passing through the region. The area is also one of the top air transportation regions in the country, giving occupiers close access to two of the top 15 cargo airports in the country — John F. Kennedy International Airport in New York and Newark Liberty International Airport in New Jersey.
Executive Managing Director Woodbridge
Michael Markey
“New Jersey’s big-box industrial market began the first half of 2019 with a 39.4% slowdown in new deliveries compared to the same period last year. Construction figures are down, however this is not due to a decrease in demand but instead the decrease of available land breaking ground. Developers have turned to redevelop outdated inventory or contaminated sites for remediation to meet tenant demand. For example, a joint venture between Advance Realty and Greek Development are breaking ground on a former brownfield site near Exit 12, which, once completed, will be an industrial park of eight buildings comprising 4.1 million square feet named the Linden Logistics Center.”
Northern-Central
New Jersey
Surrounded by more than 61 million people within 250 miles of its core, the Northern-Central New Jersey market services the largest population concentration in the country. Because of its location and robust logistics advantages, occupier demand remains strong for big-box product with vacancies finishing midyear at 2.7%, the lowest big-box vacancy rate in the United States and second to Toronto in North America. Demand from e-commerce retailers kept new leasing activity robust at midyear at 9.6 million square feet, putting the market on pace to set an all-time record by year-end. Strong leasing activity kept absorption positive, at 4.3 million square feet. While this is a respectable amount, it was much lower than the 6.6 million square feet absorbed at the same time a year ago. Low vacancy rates and robust activity are keeping taking rents high, at $7.57 per square foot per year NNN —the highest taking rent for big-box space in the United States and again, second only to Toronto in North America. Development was robust in 2018, with a decade high 11.2 million square feet completed, however new construction has declined in the first half of 2019 to 4.3 million square feet due to a dwindling supply of available land to develop. While under construction product is also on the decline, developers are still finding some sites in the region, with 7.2 million square feet under construction. Not surprisingly, much of this space is showing strong demand and will be taken quickly in the coming year. Big-box vacancies are projected to stay near record lows in the coming quarters. Despite the need for new big-box space, land is getting harder to find, especially in Northern New Jersey. Because of this, redevelopments of older industrial, retail, or even Class B office space will increase in the region, despite the higher costs. The region could also see interest for future multistory warehouse development, although, at the time of this report, the immediate plans for these types of buildings were centered within the five New York City boroughs.
live within 250 miles of the market core
61 million people
Wayfair 953,595 SF 343 Half Acre Rd. Cranbury, NJ Direct Lease
Crate & Barrel 870,950 SF 353 Half Acre Rd. Cranbury, NJ Direct Lease
Amazon 625,000 SF 495 Weston Canal Rd. Somerset, NJ Direct Lease
IDI Logistics 1,351,200 SF 340 Middlesex Center Blvd. Monroe Township, NJ Investment $132,728,376 $98.23 PSF
IDI Logistics 751,450 SF 101 Middlesex Center Blvd. South Brunswick, NJ Investment $73,814,934 $98.23 PSF
SHI International Corp. 396,750 SF 400 Ridge Rd. Piscataway, NJ Owner User $59,512,50 $150.00 PSF
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Surrounded by more than 61 million people within 250 miles of its core, the Northern-Central New Jersey market services the largest population concentration in the country. Because of its location and robust logistics advantages, occupier demand is strong within New Jersey’s industrial market. The Northern-Central New Jersey market is home to the busiest seaport on the East Coast of the United States — the Port of New York and New Jersey — which remains one of the top demand drivers for industrial real estate in the region. The Port of New York and New Jersey set a new record in October 2019, handling 666,381 TEUs, representing a 1.2% increase over the previous October record set in 2018 and was driven by the Port’s ability to welcome the world’s largest ships. In November, the Neopanamax container ship, Theseus, arrived at the Port’s largest facility, Maher Terminals. Theseus’ arrival was on the heels of Triton’s, which made its first visit to the Port earlier this year as one of the largest ships to enter the Port of New York and New Jersey.
Major Logistics Driver: The Port of New York and New Jersey
Occupier demand for Class A product continued to grow in 2019, widening the performance gap between Class A space and the overall market. Unrelenting demand has constrained supply for this product type. As a result of this heightened demand, both developers and owners continue to be proactive as New Jersey’s industrial market continues to grow at an unprecedented rate. Strong investment activity, together with a new wave of construction projects, demonstrates continued confidence in the New Jersey industrial market and indicates continued momentum in 2020 and beyond.”
Senior Managing Director | Parsippany
John Donnelly
Owners and developers continue to be active in response to strong market improvements, racing to break ground on new construction projects. Despite land constraints in parts of the state, new supply will continue to be added to the market. At year-end, 25 buildings were under development totaling 15 million square feet, while 14 buildings were delivered to market totaling 6.5 million square feet. Constrained availability has resulted in sustained average taking rent growth, up 5% year over year to $8.58 per square foot. Big-box warehouse new construction continued to garner a premium compared to the remainder of the market as space between 500,000 square feet and 750,000 square feet experienced the largest year-over-year jump and totaled $8.06 per square foot. This rate is up 25.9% over the $6.40 per square foot recorded in 2018.
Occupier demand remained strong for bulk industrial product with vacancies ending the year at 2.5%, the lowest big-box vacancy rate in the United States and second to Toronto in North America. The Northern-Central New Jersey market’s location and robust logistics advantages continue to attract tenants, with 3PLs taking a majority of the space. Big-box vacancies are projected to stay near record lows in the coming quarters. New Jersey’s industrial market continued to strengthen in the fourth quarter of 2019, as healthy demand for large blocks of space helped keep net absorption positive at 6.4 million square feet. The fourth quarter alone recorded 4.2 million square feet of leasing activity, bringing the year-end total to 18.8 million square feet — a 44% year-over-year increase setting an all-time record. This improvement can be attributed to the increase of big-box transactions during the last three months of the year. Overall, nine transactions greater than 200,000 square feet were signed during the fourth quarter.
Demand for big-box warehouses boosts end of year leasing activity
NEXT: SOUTHERN NEW JERSEY-EASTERN PENNSYLVANIA
PREVIOUS: NORTHERN CALIFORNIA
347 352 361 369 382 406 443 471 496 503
174,779,432 181,141,185 185,866,328 194,049,729 194,049,729 228,362,024 243,417,093 245,581,633 264,037,108 267,647,727
17,047,991 12,756,043 16,222,192 12,326,948 7,794,760 9,985,132 12,318,210 13,686,422 18,854,992 19,123,064
9.8% 7.0% 8.7% 6.4% 4.0% 4.4% 5.1% 5.6% 7.1% 7.1%
882,148 1,021,551 502,269 2,423,248 4,096,500 4,113,609 6,638,719 8,090,030 10,872,709 11,129,244
5,202,055 6,930,394 2,895,604 8,620,387 12,715,589 11,135,845 18,233,247 15,686,180 13,420,298 3,342,547
$3.63 $4.01 $4.04 $4.08 $4.15 $5.04 $5.06 $5.11 $5.22 $5.16
– 8.1% 8.4% 7.6% 6.7% 5.9% 5.9% 5.7% 5.5% 5.8%
1,045,000 2,638,446 6,361,753 4,725,143 8,183,401 13,326,217 20,986,078 16,423,281 18,455,475 3,610,619
1,664,946 3,823,473 5,019,909 7,291,433 12,480,079 14,384,906 9,423,205 16,791,571 22,499,915 23,889,673
101
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The Southern New Jersey–Eastern Pennsylvania market is one of the most logistics-friendly markets in the country. The region is centrally located along the East Coast, giving it the capability to handle container volumes from three major seaports: the Port of New York and New Jersey, the Port of Baltimore and the Port of Philadelphia. Two Class I railroads (CSX and Norfolk Southern) and 100 major interstate interchanges are located within the region. In addition, five airports with major cargo handling capabilities are within 90 minutes of the region. This includes the Lehigh Valley International Airport, which was one of the fastest growing cargo airports in the U.S. in 2018.
Senior Managing Director Conshohocken
Mark Chubb
“Although annual net absorption is anticipated to top 2018’s total because of robust leasing, year-to-date net absorption was down because of a slow first quarter. Retail distribution center closures (i.e. Sears) have also added previous generation availability. The speculative construction pipeline appears to be slowing in the I-78 and I-81 corridor markets. There is an active entitlement pipeline in suburban Philadelphia and Southern New Jersey, but it is unlikely that any other projects greater than 500,000 square feet will commence before the end of 2019. Asking rent growth continues in all market areas, but the average signing rent appeared to dip as the result of two one-million-square-feet deals. Previous generation buildings in areas with abundant labor and “deal maker” ownerships continue to generate deals.”
Southern New Jersey
Eastern Pennsylvania
At approximately 268 million square feet, the Southern New Jersey-Eastern Pennsylvania market is the second-largest big-box market in North America. With more than 58 million people within 250 miles of its core and a plethora of logistics advantages, the market continues to post robust fundamentals. This is evidenced by the record-breaking 11 million square feet of big-box leasing activity and three million square feet of net absorption in the first half of 2019. Retail companies continue to expand within the region in droves, with Lowes and Ferrero’s signing large deals in the first half of 2019. Despite strong leasing and net absorption, the overall vacancy rate was stable compared with year-end at 7.1% because of robust speculative development. There is no end in sight for the amount of newly constructed product hitting the market, as a record 23.9 million square feet was under construction at midyear. Sales activity also continues to be strong for investors during the first half of the year, with U.S. Realty Advisors and Colony Capital expanding its portfolios by more than one million square feet. These purchases, along with a multitude of others, kept the cap rap low at 5.8%. With economic conditions in the U.S. stable in the near-term and the surrounding East Coast ports performing well despite global trade concerns, big-box fundamentals should remain healthy in the region for the foreseeable future. A majority of the seven vacant buildings larger than 750,000 square feet, along with a good chunk of the 23.9 million square feet of under construction product will be taken, meaning another year of positive net absorption. Taking rents will start ascending and the overall vacancy rate should stay at or near its current rate in the coming quarters.
of leasing activity is the 2nd highest in North America
11.1 million square feet
Lowe's 1,200,000 SF 4532 United Dr. Shippensburg, PA Direct Lease
confidential 1,138,320 SF 801 Centerville Rd. Carlisle, PA Direct Lease
Ferrero USA 738,720 SF 112 Bordnersville Rd. Jonestown, PA Direct Lease
U.S. Realty Advisors LLC 1,446,888 SF 400-500 S. Muddy Creek Rd. Denver, PA Investor $117,053,239 $80.89 PSF
Colony Capital 1,430,011 SF Capital Logistics Center: 200-400 Capital Lane; 300, 600 Hunter Lane; 500 Industrial Middletown, PA Investor $103,246,794 $72.20 PSF
Colony Capital 1,082,200 SF 270 Midway Rd. Bethel, PA Investor $79,574,166 $73.53 PSF
Spreetail 612,560 SF Dundee Rd. Wilkes Barre, PA Direct Lease
Gramercy (Blackstone) 652,411 SF 240 Mantua Grove Rd. West Deptford, NJ Investor $77,937,018 $119.46 PSF
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The Eastern Pennsylvania-Southern New Jersey (as well as Northern Delaware) market is one of the most strategically located in the county. The region is centrally located along the East Coast with access to four seaports: the Port of New York-New Jersey, the Port of Philadelphia-South Jersey, the Port of Wilmington (DE) and the Port of Baltimore. The region is served by two Class I railroads (CSX and Norfolk Southern) and five airports with major cargo handling capabilities. A complex highway network including I-78, I-80, I-81, I-83 and I-95, in addition to the Pennsylvania Turnpike and multiple U.S. highways transverse the region. More than 58 million people are within 250 miles of the market core.
Major Logistics Driver: Access to Four Seaports
The Eastern Pennsylvania, Southern New Jersey and Northern Delaware bulk market was in a healthy balance at the end of 2019, due to steady growth in both supply and demand. The increase in vacancy is likely to have a short duration as the deal pipeline suggests strong absorption in 2020. Following the explosive activity over the last five years, few large development sites are left in core locations along the I-78 and I-81 corridors. Developers in pursuit of large-format sites have shifted their attention to areas with historically minimal speculative development, most notably the Northeast PA submarket, the I-78 corridor in Berks County and the southern I-81 corridor between Carlisle and Hagerstown. Although most of the recent speculative construction along the I-95 and I-295 corridors in suburban Philadelphia and Southern New Jersey have been smaller format, there has been an increased developer interest in these areas for developments between 200,000 and one million-square-foot-plus projects.”
Senior Managing Director | Conshohocken
Mark chubb
Investment activity continued to be strong in 2019, yet transaction volume was down year over year. Multiple corporate and fund acquisitions impacted the ownership landscape over the year causing cap rate compression to 4.9% — the lowest value on record. Year-over-year signing rents increased 3.8% — a further suggestion that rent growth will maintain investor interest in the coming quarters. Bulk space deliveries reached record levels in 2019 and totaled 21.1 million square feet, a 27.5% increase year over year. Construction starts are down — particularly along the I-81 corridor — however 10 facilities were under construction at the close of the year, with more than three million square feet already spoken for by e-commerce and 3PLs.
The logistic advantages of the Southern New Jersey-Eastern Pennsylvania market continue to support demand in the area. New leasing and net absorption topped 2018 totals and a strong pipeline of pending deals indicates a vacancy drop is likely during the first half of 2020. Regional vacancy for big-box space increased 210 basis points to 8.5% year over year, as record construction levels were reached in the market. Spec completions were a major component of the increase, but the vacancy of previous generation retail distribution centers also had an impact. Five of the full building vacancies greater than 500,000 square feet are previous generation buildings.
Strong totals recorded for leasing, net absorption and investment activity
NEXT: TORONTO
PREVIOUS: NORTHERN-CENTRAL NEW JERSEY
580 582 585 590 596 600 603 607 615 622
217,010,213 217,500,775 219,516,783 222,203,834 224,320,580 226,162,325 227,352,258 230,617,779 233,250,145 236,425,420
13,040,032 9,713,940 9,059,724 8,870,051 8,621,388 4,360,858 6,433,892 3,767,339 2,018,222 2,703,211
6.0% 4.5% 4.1% 4.0% 3.8% 1.9% 2.8% 1.6% 0.9% 1.1%
4,184,941 2,332,668 2,354,973 5,862,055 3,826,678 4,819,034 6,380,295 5,536,250 10,557,390 2,895,469
1,547,702 3,816,654 2,670,224 2,876,725 2,365,409 6,102,275 1,943,474 3,511,477 5,280,123 1,975,401
– – – – – $5.78 $6.01 $6.36 $6.91 $8.43
– – 6.5% 6.6% 6.8% 6.6% 6.0% – – –
– – 2,180,723 1,386,011 2,361,701 3,404,213 2,878,961 5,354,212 2,487,908 604,295
– – 5,476,747 3769675 7,370,604 6,821,355 5,862,245 1,934,408 6,212,706 6,915,991
50
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The Greater Toronto Area (GTA) is an ideal logistics hub due to its superior access to major 400-series highways — 401, 407, 409, 427, 403, 400 and 404 — providing connectivity to locations across southern Ontario and to U.S. border crossings. The GTA also offers connectivity to two major railroads, the Canadian National Railway (CN) and the Canadian Pacific Railway (CP), with multiple intermodal yards located in Milton, Brampton, Caledon and Vaughan. Canada’s largest and busiest airport, Toronto Pearson International Airport, is also centrally located to the GTA markets and processes more than 45% of Canada’s air cargo.
Executive Vice President Toronto
Colin Alves, SIOR
“The Greater Toronto Area is experiencing solid levels of absorption, even with a constrained speculative development pipeline, particularly in excess of 400,000 square feet. Vacancy is close to 0% in several submarkets. Q2 2019 rent growth was in excess of 20% year over year and this trend is expected to continue. With high levels of pre-leasing activity, tenants are exploring building deliveries in 2021."
Canada
The Greater Toronto Area market is the third-largest big-box market in North America. The region has become home to many e-commerce fulfillment/distribution centers for companies such as Amazon.com, Wayfair and IKEA, that are drawn to the region’s vast transportation infrastructure. Demand has been strong for big-box product in the market for quite some time, leading to one of the lowest overall vacancy rates in North America. Vacancy rates remain the lowest in North America, increasing slightly from the record low 0.9% at year-end to 1.1% at midyear 2019. There are very few full building vacancies on the market, with only four options at year-end, none of which are larger than 500,000 square feet. Despite the low amount of full building vacancies, leasing activity was solid to start 2019, at 2.9 million square feet. There might be no market in greater need of new big-box development than Toronto, and because of this, 6.9 million square feet was under construction at midyear. However, much of this space is already spoken for and won’t provide much of a relief for the record low vacancies in 2019. Despite a pickup in under-construction product, the prospect for future development is murky due to a scarcity of available land, as well as a difficult entitlement process in the region. As long as the inventory of available product remains limited, vacancy rates are likely to stay at record lows. In the coming quarters, absorption is expected to remain positive but lower than previous year’s totals while taking rents will escalate at a faster pace for the foreseeable future.
is the lowest in North America
1.1% vacancy rate
Polar Pak 399,548 SF 2 Bramkay St. Brampton Direct Lease
Give & Go 375,000 SF 150 Gibraltar Rd. Vaughan Direct Lease
3M 318,805 SF 2751 Peddie Rd. Milton Renewal
Triovest 406,485 SF 95 Market Dr. Milton Owner User $69,102,450 $170.00 PSF
PIRET 361,800 SF 2562 Stanfield Rd. Mississauga Investment $37,989,000 $105.00 PSF
PIRET 313,500 SF 999 Boundary Rd. Oshawa Investment $26,691,000 $86.00 PSF
Wesbell Logistics 264,860 SF 6135 Kennedy Rd. Mississauga Sublease
CanFirst 288,161 SF 1121 Walkers Line Burlington Investment $30,833,227 $107.00 PSF
*Taking NNN rent is in CAD.
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The Greater Toronto Area (GTA) offers connectivity to two major railroads, the Canadian National Railway (CN) and the Canadian Pacific Railway (CP), with multiple intermodal yards located in Milton, Brampton, Caledon and Vaughan. Canada’s largest and busiest airport, Toronto Pearson International Airport, is also centrally located to the GTA markets and processes more than 45% of Canada’s air cargo. Strong tenant demand for industrial space continues to support the growth of the GTA region. The GTA represents the largest population center in Canada and draws international attention as the market of choice for companies looking to expand into Canada. The e-commerce sector in general is a strong source of demand with continued transition of supply chains to support this increasingly important channel. Canadian online sales represented 6.6% of total retail in Q4 2019 — compared to more than 20% in the UK. This means that consumers are buying international e-commerce and shipping product into Canada. Companies are partnering with 3PLs to improve customer experience and reduce transit times and cost of transport. As the largest industrial market in Canada, the GTA will continue to be a major driver for logistics within the country.
Major Logistics Driver: CN and CP Intermodals, Toronto Pearson International Airport
The Greater Toronto Area (GTA) industrial market continues to post record fundamentals, led by expanding e-commerce footprints and new entrants into the market, retailers reshuffling their supply chains, 3PLs and the growing food and beverage sector. Trends indicate the average square footage of requirements are increasing, as demonstrated by a record number of transactions and requirements in excess of 400,000 square feet. 2020 will see a return to in-fill redevelopment in core GTA markets as market rents justify purchase prices.”
Executive Vice President, Sales Representative | Toronto West
Colin alves, SIOR
Future supply is expected to be constrained, due to a lack of serviceable land and Green Belt regulations. However, tertiary markets — such as Hamilton and Cambridge — have seen an uptake in industrial land purchases and spec developments. Historically, vacancy has not measured more than 6% for big-box facilities in the last 10 years. The overall rate remained low in 2019 and has hovered near 1% since 2017. With availability in bulk space measuring 1.6% at year-end, average taking net rents continued its upward trajectory and increased by approximately 30% year over year, averaging $8.81 per square foot.
Occupier demand continued to be strong in the Toronto big-box market, even with a constrained speculative development pipeline, particularly in projects greater than 400,000 square feet. Nearly six million square feet of facilities greater than 750,000 square feet were under construction at year-end, absent of any vacancy. Amazon, for instance, is building a one-million-square-foot fulfillment center in Scarborough to be completed in 2020 — and their seventh fulfillment center in Ontario. Demand for industrial space continues to outpace supply. At the close of the year, net occupancy gains totaled 4.1 million square feet, while just 2.6 million square feet of new product was added to the market. Given this, it comes as no surprise that 12.7 million square feet was under construction at year-end to satisfy the increased interest in bulk space.
Continuous momentum in the Greater Toronto area
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PREVIOUS: SOUTHERN NEW JERSEY-EASTERN PENNSYLVANIA