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I-4 CORRIDOR, fl
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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
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
$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%
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
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
# of Buildings
Existing Inventory
Vacant Inventory
Vacancy Rate
Leasing Activity
Net Absorption
Taking NNN Rent
Cap Rate
Under Construction
Construction Completions
Big-Box Buildings in North America
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. Markets posting the largest year-over-year increases in overall net absorption include Cincinnati (80.3% increase), Northern California (105.7% increase), and the I-4 Corridor (228.6% increase). 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 changes 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.
Overall Net Absorption
12%
14%
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
0
48.3
47.2
41.9
33.6
60.9
151.1
141.7
60
40
20
56.4
42.5
34.6
32.1
47.4
51.1
138.5
125.7
Big-Box Key Statistics
North America Overview
Ceilings heights of 28' clear or greater
200,000 SF or larger industrial building
Primarily used for distribution
What constitutes a big-box building?
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.
Unless otherwise specified, all report data is for year-end 2018.
Jack Rosenberg, SIOR National Director, Logistics and Transportation jack.rosenberg@colliers.com
Pete Quinn, SIOR National Director, Industrial Services pete.quinn@colliers.com
James Breeze National Director of Industrial Research james.breeze@colliers.com
Contact
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.
Big-Box Market Report
North America
SCROLL DOWN
Pre-cast or tilt-up concrete construction
81,656,513 SF $4.85 4.9% 7,555,111 SF
Existing Inventory: Average Rental Rate: Vacancy Rate: Net Absorption:
199,372,201 SF $3.62 10.7% 16,481,672 SF
ATLANTA, GA
98,543,419 SF $5.55 8.2% 9,456,516 SF
NORTHERN CALIFORNIA
341,120,600 SF $5.04 4.4% 20,764,000 SF
INLAND EMPIRE, CA
49,936,211 SF $4.76 18.4% 1,346,280 SF
GREATER PHOENIX, AZ
41,929,018 SF $4.19 8.8% 3,672,198 SF
KANSAS CITY, MO
241,571,578 SF $3.82 11.2% 14,151,972 SF
DALLAS-FORT WORTH, TX
HOUSTON, TX
103,173,986 SF $3.50 7.5% 3,943,599 SF
MEMPHIS, TN
254,916,764 SF $4.58 9.1% 10,867,349 SF
CHICAGO, IL
94,341,511 SF $3.76 7.7% 5,320,503 SF
INDIANAPOLIS, IN
66,072,237 SF $4.00 4.0% 5,248,250 SF
CINCINNATI, OH
84,839,513 SF $3.57 7.5% 3,676,077 SF
COLUMBUS, OH
233,250,145 SF $6.91 0.9% 5,280,123 SF
TORONTO, CANADA
108,897,210 SF $8.17 3.0% 10,207,397 SF
NORTHERN-CENTRAL, NJ
263,235,613 SF $5.22 7.1% 13,420,298 SF
SOUTHERN NJ-EASTERN PA
72,032,064 SF $5.03 4.9% 7,090,320 SF
2018 Year-End Review and Outlook
Big-Box Building Inventory
38
Fully Vacant
694
Big-Box Buildings
> 750,000 SF
51
836
500,000 - 749,999 SF
210
3,576
200,000 - 499,999 SF
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
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.”
Back
Georgia
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.
VIEW PROPERTIES
of new leasing activity in 2018 is an all-time record.
25.7 million square feet
Home
Ben Logue, SIOR
6
71
66
25
274
200,00 - 499,999 SF
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
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
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
$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%
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
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
Big-Box Buildings in Atlanta (200K+ SF & 28' Clear)
Indianapolis Inland Empire Kansas City Memphis Northern California Northern-Central New Jersey Southern New Jersey / East Pennsylvania Toronto
Atlanta Chicago Cincinnati Columbus Dallas-Fort Worth Greater Phoenix Houston I-4 Corridor
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NEXT: CHICAGO
PREVIOUS: TORONTO
- 3 big box-buildings - Aurora, IL - 3-property investment portfolio sale $86.34 PSF
The Blackstone Group LP 1,744,203 SF
- 5 Chicago-area big-box buildings - Various Cities - Part of a 148-property national investment portfolio sale Price Withheld
The Blackstone Group LP 1,895,170 SF
- 8 Chicago-area big-box buildings - Various Cities - Part of a 342-property national investment portfolio sale Price Withheld
The Blackstone Group LP 3,206,344 SF
- 12 Chicago-area big-box buildings - Various Cities - Part of an entity-level acquisition of DCT Industrial Trust Price Withheld
Prologis 5,445,799 SF
Baxter Rd. Rockford, IL Build-To-Suit
Berner Food & Beverage 675,840 SF
Cargo Ct. Minooka, IL Build-To-Suit
Kellogg’s 705,661 SF
Pending Street Address Lockport, IL Build-To-Suit
S&S Activewear 750,314 SF
3851 Youngs Rd. Joliet, IL Expansion/Renewal
Whirlpool Corporation 1,001,184 SF
402 406 407 410 418 437 477 518 554 578
174,896,238 174,896,238 176,246,238 177,111,981 183,433,259 191,107,885 207,187,079 224,730,700 244,687,531 254,916,764
28,333,191 24,310,577 17,977,116 15,762,966 15,591,827 13,759,768 14,710,283 16,180,610 23,561,292 23,132,105
16.2% 13.9% 10.2% 8.9% 8.5% 7.2% 7.1% 7.2% 9.6% 9.1%
8,770,405 9,876,554 11,496,182 13,372,315 15,967,560 12,902,662 16,248,184 14,390,831 11,266,980 16,447,765
2,840,661 4,022,613 7,683,461 3,079,893 6,492,417 9,506,685 15,128,679 16,073,293 12,576,149 10,867,349
$3.69 $3.47 $3.61 $3.98 $4.10 $4.43 $4.46 $4.49 $4.53 $4.58
6.2% 6.5% 7.0% 7.0% 6.5% 5.8% 5.3% 5.0% 5.0% 5.1%
5,309,160 – 1,350,000 865,743 6,321,278 7,674,626 16,079,194 17,543,621 19,956,831 10,235,066
– 1,350,000 627,100 4,026,851 4,307,145 8,801,182 11,037,540 19,208,730 7,054,698 15,650,290
Big-Box Buildings in Chicago (200K+ SF & 28' Clear)
7
68
8
88
32
422
Chicago is the major rail center of the United States. Six of the seven rail lines have hubs in the greater Chicago area, a primary reason the region is one of the largest big-box industrial markets in the country. The region claims 70% of the nation’s rail and intermodal activity. Rail is not the only logistics advantage 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 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. Chicago O’Hare is the fourth-busiest cargo airport in the U.S. and its cargo capabilities will continue to be an advantage for occupiers in the region.
National Director, Logistics and Transportation Group Principal | Chicago
Jack Rosenberg, SIOR
“The Chicago industrial real estate market continues to show great fundamentals for real estate investors. Tenants will find new buildings with higher ceilings, better loading and state-of-the-art energy efficiencies, however the low vacancy rates means competition for the best availabilities and higher rents. Chicago’s eight million-plus population and our location with great rail intermodal service, a great airport and our location in the middle of the country continues to drive our industrial real estate market.”
Illinois
With its multitude of logistics advantages, and more than 37 million people residing within 250 miles, Chicago remains one of the most in-demand big-box markets in North America. Because of this demand, fundamentals were robust in 2018, with strong leasing activity, lower vacancies, significant investor activity and increased taking rents. New leasing activity was robust once again in 2018, with just under 16.5 million square feet of new transactions signed, an all-time record for the market. Continued strong activity kept net absorption positive at nearly 11 million square feet, the fourth consecutive year net absorption surpassed 10 million square feet. Strong activity raised first year taking rents to $4.58 per square foot per year NNN, a $0.05 per square foot per year increase compared with the same time a year ago. Increased rents kept investor interest strong and sale prices high, keeping cap rates low at 5.1%, the fifth consecutive year cap rates were less than 6%.
Overall vacancy rates declined in the region to 9.1%, 50 basis points lower than the previous year. Despite lower vacancies and new development dipping—finishing at a still-strong 10 million square feet in 2018—there was an additional 15.7 million square feet under construction at year-end. With demand expected to keep its current pace, and new supply from development expected to increase, vacancy rates will remain stable and taking rents will continue its upward trajectory in the coming year. Look for e-commerce, retail and wholesale occupier demand to stay robust, but the biggest increases in occupier demand will come from the third-party logistics industry as many of its occupiers look to shore up their footprint in core markets across the country to increase their ability to service their clients’ e-commerce requirements.
per year average first year taking rent in 2018 is the highest on record.
$4.58 per square foot
NEXT: CINCINNATI
PREVIOUS: ATLANTA
4520 LeSaint Cir. Fairfield, OH Investment $64.61 PSF
Mapletree Investments Ltd 303,376 SF
1100 Burlington Pike Fairfield, KY Investment $34.40 PSF
STAG Industrial 465,136 SF
Airpark Exchange Business Park Hebron, KY Investment $54.38 PSF
Blackstone RE Income Trust 595,786 SF
Capital Center I Springdale, OH Investment $31.70 PSF
Dalfen America 905,446 SF
8754 Trade Port Dr. West Chester, OH Renewal
Cornerstone Brands 479,512 SF
2505 Ted Bushelman Blvd. Hebron, KY New-Direct
Schenker Logistics 541,250 SF
2365 Litton Ln. Hebron, KY New-Direct
UMA Enterprises 589,200 SF
South Afton Industrial Park Batavia, OH Build-to-Suit
Design Within Reach 617,670 SF
125 125 126 128 131 133 137 143 148 157
48,106,385 48,106,385 48,909,185 49,111,185 50,169,056 51,394,043 53,623,657 57,289,504 59,363,184 66,072,237
6,687,322 5,641,802 6,368,636 5,509,099 4,143,516 2,662,329 3,179,593 4,191,432 3,335,511 2,640,734
13.9% 11.7% 13.0% 11.2% 8.3% 5.2% 5.9% 7.3% 5.6% 4.0%
– – 3,013,872 2,279,043 5,358,153 3,007,563 1,956,168 3,444,246 5,470,578 5,759,419
-1,750,895 1,045,520 -726,834 1,061,537 2,423,454 3,144,497 1,809,123 2,654,038 2,910,501 5,248,250
$2.77 $2.93 $2.88 $2.77 $3.05 $2.81 $3.36 $3.67 $3.88 $4.00
10.4% 9.0% 8.1% 8.0% 7.2% 7.2% 6.9% 7.0% 6.1% 6.0%
870,135 – 802,800 1,072,046 1,150,000 1,808,164 2,931,375 3,665,877 2,073,680 4,728,915
– 366,096 930,588 1,227,046 1,789,500 2,156,220 2,110,587 2,214,973 3,663,328 7,128,374
Big-Box Buildings in Cincinnati (200K+ SF & 28' Clear)
1
13
2
112
Cincinnati’s central location makes it an ideal location from a logistics standpoint. Cincinnati is becoming an e-commerce destination due to its large workforce, excellent transportation advantages and a population of more than 35 million people within 250 miles. Cincinnati’s two main airports make the region one of the prime air freight markets in the country. The Cincinnati/Northern Kentucky International Airport is one of the largest air cargo ports in the country, finishing in the top ten in 2018. The market has the advantage of also being near the Louisville International Airport, ranked the third largest cargo airport in the U.S., which is home to UPS’ international air hub. While Cincinnati was not chosen as the location for Amazon.com’s HQ2, it is home to the new Amazon Prime Air hub.
Senior Vice President & Principal Cincinnati
John B. Gartner III, SIOR
“Cincinnati’s industrial market finished 2018 posting record absorption along with a historically high amount of construction activity. Over the next 12 months, nearly eight million square feet of bulk logistics and warehouse/distribution product will be added to the inventory, 5.8 million square feet of which is speculative. E-commerce remains the primary demand generator. Access to a large percentage of the U.S. population via truck, rail, air and water; a quality labor force; a thriving consumer products industry; and highly experienced industrial developers and owners all combine to make the Southwest Ohio and Northern Kentucky region an attractive hub for logistics operations.”
Ohio
The Cincinnati big-box market is particularly well-suited to meet the growing demand for faster delivery and the accompanying demand for warehousing and transportation. While demand from e-commerce and general retail companies continues, 3PLs expanded within the market at a robust pace in 2018, signing many large deals. These deals helped drop industrial big-box vacancies to all-time lows, activity to all-time highs and increased new development. By year-end, nearly 5.8 million square feet of big-box product had leased. The significant amount of leasing activity increased net absorption to 5.2 million square feet, more than double last year’s total and by far the most annual net absorption for the region on record.
The exceptional activity is pushing up taking rents, which finished 2018 at a decade-high $4.00 per square foot per year NNN. Demand has also driven up investor activity in the market with many investors including Mapletree Investors and Blackstone who made large acquisitions in 2018. Despite increased investor demand, cap rates remain above the national average, finishing 2018 at 6%. All signs point to continued growth in the Cincinnati big-box market in the coming quarters. The market’s logistics advantages and pro-business policies will drive an increasing number of occupiers to move into or expand within the market. This will keep activity, development and rent growth strong in the region for the foreseeable future.
of overall net absorption in 2018 is an all-time record.
5.3 million square feet
NEXT: COLUMBUS
PREVIOUS: CHICAGO
115 Enterprise Pkwy. West Jefferson, OH Investment $48.00 PSF
Granite REIT 743,600 SF
6606 Pontius Rd. Groveport, OH Investment $68.84 PSF
The Blackstone Group 1,001,344 SF
100 Enterprise Pkwy. West Jefferson, OH Investment $74.36 PSF
Granite REIT 1,223,780 SF
6600 Alum Creek Dr. Groveport, OH Investment $24.13 PSF
LCN Capital Partners 2,071,908 SF
1901 Beggrow St. Lockbourne, OH New-Direct
Quaker 802,000 SF
1550 W Main St. West Jefferson, OH Build-to-Suit
Amazon.com 855,000 SF
N/A Groveport, OH Build-to-Suit
FedEx 975,000 SF
Goodyear 1,200,000 SF
131 131 131 131 133 138 142 149 153 161
68,334,484 68,334,484 68,334,484 68,334,484 69,406,367 71,826,948 74,053,660 78,756,805 80,146,300 84,839,513
11,225,573 9,048,373 10,172,679 8,277,577 6,596,766 5,398,180 8,572,251 7,313,695 5,751,928 6,382,079
16.0% 12.9% 14.7% 12.0% 9.3% 7.4% 11.1% 9.0% 8.0% 7.5%
4,521,805 4,720,497 5,480,145 5,216,773 6,214,907 6,294,946 9,518,280 4,413,865 6,454,459 9,275,480
804,157 2,133,886 -1,233,165 1,895,102 2,757,896 3,619,167 -708,685 5,831,622 2,946,472 3,676,077
$2.90 $2.88 $2.65 $2.43 $2.32 $2.86 $3.08 $3.08 $3.34 $3.57
7.8% 7.8% 7.9% 7.6% 7.4% 7.1% 6.9% 7.0% 7.1% 7.1%
276,787 – – – 1,071,883 2,420,581 2,226,712 4,703,145 1,389,495 4,759,380
– – – 478,053 1,221,653 1,369,912 4,703,145 831,350 4,995,525 465,478
Big-Box Buildings in Columbus (200K+ SF & 28' Clear)
28
110
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
“In 2019, the Columbus industrial market can expect continued positive absorption and a growing reputation as a logistics hub. Columbus, particularly in the south and west, is very desirable to logistics providers, e-commerce companies and manufacturers, as it has easy access to I-70 and I-71 as well as developable land. The region is located within a ten-hour drive of 46% of the U.S. population—a competitive advantage over other large metros. With Rickenbacker Inland Port, one of the world’s only cargo-specific airports, and the Norfolk Southern Intermodal Yard, Columbus boasts the access and resources needed for future international business.”
Columbus is one of the fastest-growing big-box markets because of its plethora of logistics advantages and its location near a large young population. Occupiers continued to lease space at a rapid pace in 2018 with more than 9.3 million square feet of new leasing activity, nearly double last year’s total, and the second highest mark on record. The large amount of leasing activity kept occupancy gains strong at 3.7 million square feet, nearly 25% higher than 2017. Positive absorption will continue at a rapid pace in 2019, as many of the large transactions signed in late 2018 will occupy—a good sign that 2019 will finish with the 10th consecutive year of positive absorption for big-box space. Continued positive absorption drove up first year taking rents to an all-time high of $3.57 per square foot per year NNN, 7% higher than the previous year. Columbus is ripe for increased investor demand because of higher taking rents and a cap rate of 7.1%, much higher than nearby core markets.
Developers were bullish about the Columbus industrial market in 2018, with 4.8 million square feet of new development. Factors driving development include a booming inland port and a growing population base of nearly 36 million people within 250 miles of Columbus. These factors are also increasing e-commerce and retail demand in the region, with Amazon.com and Goodyear taking large facilities in the region. In the coming quarters, look for leasing activity to stay strong, keeping net absorption positive, and taking rents to continue their rise for the foreseeable future. With new development decreasing the first half of 2019, vacancies will decrease, but new development is warranted and needed—at the time of this report there was only one vacant building in Columbus larger than 500,000 square feet.
live within 250 miles of Columbus.
36 million people
NEXT: DALLAS-FORT WORTH
PREVIOUS: CINCINNATI
300 Gateway Pkwy. Roanoke, TX Investment $65.00 PSF
John Hancock Real Estate 603,050 SF
4800 Sylvania Fort Worth, TX Investment $93.00 PSF
Pure Industrial REIT 657,043 SF
3535 N. Houston School Rd Lancaster, TX Investment $58.00 PSF
Liberty Property Trust 900,043 SF
1100 and 1150 E. Cleveland Dallas, TX Investment $54.00 PSF
Brookfield Property Group 1,499,570 SF
1303 W. Pioneer Pkwy. Grand Prairie, TX New-Direct
Living Spaces 858,000 SF
Mountain Creek Pkwy. and I-20 Grand Prairie, TX New-Direct
HD Supply 863,328 SF
8601 E. Sam Lee Ln. Northlake, TX New-Direct
Stanley Black and Decker 1,214,526 SF
9314 W. Jeffersson Blvd. Grand Prairie, TX New-Direct
Home Depot 1,500,000 SF
343 344 346 347 359 383 416 454 498 539
145,077,649 145,477,772 146,802,772 147,754,252 154,234,473 168,405,670 183,482,638 199,529,585 221,945,347 241,571,578
28,999,146 26,733,063 20,076,380 15,199,568 12,279,273 18,492,747 19,263,148 17,941,585 21,701,777 27,176,036
20.0% 18.4% 13.7% 10.3% 8.0% 11.0% 10.5% 9.0% 9.8% 11.2%
12,357,250 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
2,840,062 2,666,206 7,981,683 5,828,292 9,400,516 7,957,723 14,306,567 17,368,510 18,655,570 14,151,972
$3.28 $3.21 $3.18 $3.22 $3.26 $3.51 $3.66 $3.72 $3.79 $3.82
7.8% 8.0% 8.0% 7.4% 6.3% 6.8% 7.0% 6.0% 6.8% 6.6%
9,098,767 400,123 1,325,000 951,480 6,480,221 14,171,197 15,076,968 16,046,947 22,415,762 19,626,231
400,123 1,020,000 951,480 3,265,722 12,408,399 12,860,719 15,428,887 19,774,986 17,652,019 15,278,607
Big-Box Buildings in Dallas-Fort Worth (200K+ SF & 28' Clear)
64
16
96
59
380
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
Allen Gump SIOR, CCIM
“While it was impossible to keep 2017’s pace of net absorption going into 2018, the Dallas-Fort Worth market still was able to absorb a significant amount of space. Currently we know there are several million square feet of deals circling the DFW region, and several build-to-suits larger than 500,000 square feet are currently under construction in both Dallas and Fort Worth. The fourth quarter saw large deals signed in existing buildings by companies new to the DFW area—always a great sign. Fort Worth is seeing activity in new construction in north and south Fort Worth as well as the Alliance area by multiple developers, and with a robust county labor base it’s sure to be successful. South Dallas and East Dallas will continue to attract the largest of users due to the land opportunities available.”
Texas
Dallas-Fort Worth’s location, abundance of land and strong labor force makes it one of the fastest-growing big-box markets in the country. While activity was not on par with 2017, there were still plenty of new transactions signed in the region, bringing new leasing activity to nearly 23 million square feet in 2018, the fifth consecutive year that new leasing activity surpassed 20 million square feet and the third-highest in North America. Net absorption was also robust at just over 14 million square feet, the fourth consecutive year exceeding 10 million square feet. Continued strong leasing activity and positive net absorption put upward pressure on taking rental rates. The first year taking rents for big-box product finished 2018 at a record high $3.82 per square foot per year NNN. While record high rents would be a cause for concern in previous cycles, rapidly expanding transportation costs make locating in Dallas-Fort Worth necessary to any occupiers supply chain and mitigates the expanding cost to rent facilities in the region. Cap rates in the region are higher than the North American average, finishing 2018 at 6.6%, as the Dallas-Fort Worth market continued to offer investors the potential for higher yields compared to other core markets in the U.S.
Despite a decline in activity, new construction continues to be completed at a rapid pace with nearly 20 million square feet of construction completions. There is no end in sight to the massive amount of big-box development in Dallas-Fort Worth, as more than 15.3 million square feet of big-box product was under construction at year-end. Because of continued new development, overall vacancy rates are on the rise, finishing 2018 at 11.2%, the highest vacancy rate since 2011. There are plenty of reasons for optimism for the Dallas-Fort Worth big-box market for 2019 and beyond. The population is growing, with more than 26 million people within 250 miles of the core. Labor is abundant and average hourly wages for warehouse workers finished 2018 at $13.63, lower than the national average of $13.97 per hour. Corporations continue to move their headquarters into the region at a swift pace, attracting new consumers. Also despite a drop in activity in 2018, there are plenty of tenants currently looking for space, which will increase leasing fundamentals in the first half of 2019. With Dallas’ economic prowess and rising population, big-box activity will likely remain strong and continue to absorb much of the new development in the region in the coming quarters.
$3.82 per square foot
NEXT: GREATER PHOENIX
PREVIOUS: COLUMBUS
8602 W. Buckeye Rd. Tolleson, AZ Investment $88.52 PSF
Prologis Group 535,213 SF
7775 W. Buckeye Rd. Phoenix, AZ Investment $70.86 PSF
CBRE Global Investors Ltd 684,420 SF
400 S. 99th Ave. Tolleson, AZ Sale-Leaseback $127.58 PSF
Colony Capital, Inc. 910,250 SF
6835 W. Buckeye Rd. Phoenix, AZ Investment $97.41 PSF
CrossHarbor Capital Partners LLC 1,009,351 SF
200 N. 99th Ave. Tolleson, AZ New-Direct
Serta Mattress 219,465 SF
16811 W. Commerce Dr. Goodyear, AZ New-Direct
Blue Buffalo Pet Products, Inc. 540,349 SF
16560 W. Sells Dr. Goodyear, AZ New-Direct
XPO Logistics 643,798 SF
400 S. 99th Ave. Tolleson, AZ New-Direct
Albertsons 910,250 SF
76 78 78 78 85 87 90 94 103 112
32,367,611 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
9,720,545 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
30.0% 23.1% 11.3% 9.9% 18.5% 20.4% 18.4% 19.3% 15.6% 18.4%
1,582,373 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
589,159 3,137,832 3,957,449 464,374 -324,827 80,261 2,142,195 989,806 4,794,171 1,346,280
$4.10 $3.86 $3.68 $4.08 $4.14 $4.24 $4.39 $4.51 $4.62 $4.76
9.1% 8.3% 7.4% 5.5% 5.6% 5.0% 6.1% 5.7% 5.0% 4.9%
2,084,710 1,148,709 – – 3,136,530 977,014 1,730,138 1,626,320 3,749,466 4,178,963
1,148,709 – – – 698,853 1,344,038 215,000 1,724,527 2,390,523 1,908,713
Big-Box Buildings in Greater Phoenix (200K+ SF & 28' Clear)
11
23
78
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 over 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 year-end, 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 2018 with an overall vacancy rate of 18.8%, 2.8 percentage points higher than 2017, but 0.9 percentage points lower than 2016.
Big-box activity was solid in 2018 with 3.9 million square feet of new leasing activity. This kept net absorption positive for the fifth consecutive year, at 1.4 million square feet. Despite a double-digit vacancy rate, new development increased in 2018 with a record 4.2 million square feet completed. Because of higher vacancies, developers do seem hesitant to break ground on new product, as at year-end only 1.9 million square feet was under construction. Despite higher vacancies to finish the year, signs point to continued growth in the Greater Phoenix big-box market in 2019. 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.
completed construction in 2018, the most in over a decade.
4.2 million square feet
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”
NEXT: HOUSTON
PREVIOUS: DALLAS-FORT WORTH
10535 Red Bluff Rd. Pasadena, TX Investment $143.00 PSF
Lexington Realty Trust 257,835 SF
10633-10653 W Airport Blvd. Stafford, TX Investment $107.00 PSF
Black Creek Diversified Property Fund 351,960 SF
Ikea Distribution Center - Borusan Rd. Mont Belvieu, TX Investment Undisclosed
PIRET (Blackstone) JV Ivanhoe Cambridge 996,482 SF
7865-7909 Northcourt Rd. Houston, TX Investment Undisclosed
ASB Real Estate Investments 1,047,800 SF
5411 AmeriPort Pkwy. Baytown, TX Build-To-Suit
NT Logistics 225,500 SF
18727 Kenswick Dr. Houston, TX New-Direct
Forward Air Solutions 289,000 SF
4925 Underwood Rd. Pasadena, TX Build-To-Suit
Kuraray America 369,755 SF
6715 N Eldridge Pkwy. Houston, TX Build-To-Suit
Goodman Manufacturing Co 411,460 SF
104 106 109 112 120 128 148 163 176 195
38,290,608 39,997,224 40,737,224 41,563,473 44,357,572 47,158,834 54,101,700 58,775,221 64,818,717 72,032,064
6,982,681 5,587,592 4,868,529 3,990,022 4,323,232 4,827,529 5,503,820 5,653,600 3,391,978 3,515,005
18.2% 14.0% 12.0% 9.6% 9.7% 10.2% 10.2% 9.6% 5.2% 4.9%
3,773,971 4,297,895 3,060,294 5,274,126 3,854,212 6,190,057 9,089,191 7,398,374 7,777,994 6,408,688
1,702,626 3,101,705 1,459,063 1,704,756 2,460,889 2,296,965 6,266,575 4,523,741 8,305,118 7,090,320
$4.26 $4.57 $4.56 $4.35 $4.42 $4.46 $4.67 $4.86 $5.15 $5.03
7.5% 8.1% 8.3% 6.0% 6.5% 5.7% 6.6% 5.8% 6.1% 5.5%
3,284,916 1,706,616 740,000 826,249 2,794,099 2,801,262 6,942,866 4,673,521 6,043,496 7,213,347
1,706,616 740,000 1,301,249 1,251,929 2,224,230 5,071,689 5,653,066 5,769,017 8,076,324 6,958,611
Big-Box Buildings in Houston (200K+ SF & 28' Clear)
9
22
165
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.
Principal & Director Houston
Walker B. Barnett, SIOR
“Houston continued to see larger warehouse completions and announcements in 2018. Driven by a strong regional economy, nation-leading job growth, steady population and housing growth and increasing importance of the Port of Houston to international supply chain channels, Houston saw an unprecedented number of big-box buildings delivered, announced or under construction. The Port of Houston is now the 6th largest U.S. port in terms of total twenty-foot equivalent units (TEUs), and the largest port in the Gulf of Mexico for container traffic. Houston’s strong economic growth has driven robust consumer spending, leading to major developments by Costco, Ikea, Best Buy, Conns, Dollar Tree and others for warehouse of at least 500,000 square feet.”
Houston’s booming port and growing population is creating robust demand 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. This robust demand continues to lower big-box vacancies in Houston which finished 2018 at 4.9%, the lowest vacancy rate in more than 10 years. The lack of available stock in Houston lowered new leasing activity in 2018 to 6.4 million square feet, the fourth consecutive year new leasing surpassed six million square feet. Despite low leasing, occupancy gains remained strong at 7.1 million square feet, the second highest total on record. Continued positive absorption kept first year taking rents high at $5.03 per square foot per year. Like many markets, the high taking rents are not a cause for concern, as the rate of rental growth is below rapidly increasing transportation costs.
Developers have taken notice of the lack of available product to significantly increase big-box construction in the region. In 2018, a record 7.2 million square feet completed construction. More than half were in buildings larger than 500,000 square feet—a size range that is in most demand from e-commerce occupiers. Product under construction remains strong at seven million square feet—the majority of this is in product smaller than 500,000 square feet. In 2019, new development greater than 500,000 square feet is needed, as at year-end only one existing building in this size was 100% vacant. 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.
rate in 2018 is the lowest in over a decade.
4.9% overall vacancy
NEXT: I-4 CORRIDOR
PREVIOUS: GREATER PHOENIX
Florida
7.6 million square feet
184
17
“The I-4 Corridor is one of the most dynamic emerging industrial markets in the country. Throughout the past 12 months, our team has seen more than 25 active user requirements larger than 250,000 square feet. There is a wave of supply, exceeding six million square feet, hitting the market in the second half of 2019 and continuing into the first of half 2020. But in the interim, finding quality product with adequate labor is challenging depending upon the specifics of the requirement.”
Executive Managing Director Industrial Services Tampa
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’s Supply Chain and Logistics Institute and Florida Polytechnic’s concentration in Material & 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.
186 186 186 186 186 190 193 202 210 219
66,743,431 66,743,431 66,743,431 66,743,431 66,743,431 70,164,369 71,275,689 74,427,566 77,902,402 81,656,513
7,418,782 7,670,874 6,693,166 6,307,242 6,557,397 5,354,539 5,334,132 4,917,098 6,092,921 3,852,634
12.5% 12.7% 11.1% 9.5% 9.8% 7.6% 7.8% 6.6% 7.8% 4.9%
357,482 655,077 1,729,536 2,514,098 2,583,975 3,620,666 3,062,204 5,605,609 7,655,460 5,181,931
-475,620 -74,442 1,055,977 1,033,924 -200,583 4,623,796 918,437 3,782,201 2,299,013 7,555,111
$4.31 $3.75 $3.89 $3.78 $4.07 $4.14 $4.31 $4.40 $4.63 $4.85
8.3% 8.0% 7.3% 7.0% 6.5% 6.5% 6.3% 6.3% 6.0% 6.0%
1,306,800 – – – 3,420,938 1,000,000 1,111,320 3,151,877 3,474,836 4,018,478
– – – – 2,403,245 703,920 1,755,713 2,631,330 4,093,686 5,914,132
Big-Box Buildings in the I-4 Corridor (200K+ SF & 28' Clear)
The I-4 Corridor industrial market is one of the fastest growing and most dynamic industrial markets in the country. More than 21 million people live within 250 miles of the market's 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 and occupied 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. The overall vacancy rate for big-box product finished 2018 at a decade low 4.9%, with most of this vacant space in buildings smaller than 500,000 square feet. At the time of this report, there were no fully vacant existing building larger than 500,000 square feet on the market.
The lack of 500,000 plus square foot product, combined with growing demand for this size range from e-commerce and 3PL tenants has created a significant opportunity for speculative development in the region. Despite this demand, new development has been slow to start, but did pick up the pace in 2018 with four million square feet of new completions. A record 5.9 million square feet is under construction, however 4.9 million square feet of this is in product smaller than 500,000 square feet. Investment activity in the region is picking up in 2018, evidenced by many large transactions signed including Tratt Properties’ purchase of one million square feet and TA Realty’s purchase of 857,000 square feet in Orlando. A pick up in investment activity dropped cap rates for big-box facilities in the region to 5.8% in 2018, 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. The market is ripe for larger development, with a massive need for facilities larger than 500,000 square feet.
18
5300 Allen K. Breed Hwy. Lakeland, FL User $81.66 PSF
8060 SR 33N Lakeland, FL Investment $98.45 PSF
12340 Boggy Creek Rd. Orlando, FL Investment $125.95 PSF
5300 Allen K. Breed Hwy. Lakeland, FL New - Direct
643 E. Crown Point Rd. Ocoee, FL New - Direct
Bay Industrial Dr. Ruskin, FL New - Direct
101 County Line Rd. Plant City, FL New - Direct
Ryan A. Vaught
IKEA 320,000 SF
City Furniture 246,031 SF
LeverEdge 242,912 SF
Plastipak 236,043 SF
DHL 292,000 SF
Griffin Capital Essential Asset REIT 605,412 SF
TA Realty 857,470 SF
Tratt Properties, LLC 1,016,080 SF
1760 County Line Rd. Lakeland, FL Investment $86.27 PSF
NEXT: INDIANAPOLIS
PREVIOUS: HOUSTON
10535 Red Bluff Rd. Plainfield, IN Investment $65.83 PSF
Granite REIT 597,025 SF
10633-10653 W. Airport Blvd. Lebanon, IN Investment $61.02 PSF
Blackstone REIT 707,952 SF
450 Airtech Pkwy. Plainfield, IN Investment $54.72 PSF
Blackstone REIT 720,000 SF
135 S Mt Zion Rd. Lebanon, IN Investment $26.89 PSF
WCP II Lebanon, LLC 1,091,435 SF
8677 Logo Athletic Ct. Greenfield, IN Build-To-Suit
Adidas 536,804 SF
CR W 200 N. Greenfield, IN New-Direct
Spectra Premium 539,943 SF
850 N Graham Rd. Greenwood, IN New-Direct
Geodis Logistics 545,010 SF
1151 S Graham Rd. Greenwood, IN New-Direct
Amazon.com 615,440 SF
119 119 121 123 129 138 147 154 168 180
60,554,138 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
7,539,880 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
12.5% 11.9% 5.7% 4.2% 6.7% 8.0% 13.0% 7.0% 7.7% 7.7%
1,613,761 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
2,950,828 923,431 5,395,797 1,859,940 2,088,138 3,738,973 1,211,196 6,632,522 6,256,160 5,320,503
$2.54 $2.48 $2.68 $2.95 $2.86 $3.38 $3.10 $3.33 $3.31 $3.76
9.6% 8.0% 8.1% 8.0% 7.1% 6.8% 6.2% 6.2% 5.9% 5.6%
3,225,889 486,624 1,705,980 977,704 3,911,688 5,029,685 5,608,380 2,916,453 7,384,431 5,810,230
– 1,049,980 – 2,787,558 2,657,271 4,155,250 1,735,569 5,578,939 4,174,405 7,343,610
Big-Box Buildings in Indianapolis (200K+ SF & 28' Clear)
31
4
46
3
103
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.
Executive Vice President Indianapolis
Jason Speckman, SIOR
“Big-box activity in the Indianapolis metropolitan statistical area (MSA) remained strong in 2018. Historically high levels of demand and net absorption in Indianapolis continue to drive new construction. More than 5.8 million square feet of big-box new construction was completed in central Indiana in 2018 with another 7.3 million square feet under construction going into 2019. Over the past 36 months, big-box net absorption in the Indianapolis MSA has exceeded new construction by 13%, which we primarily attribute towards the business-friendly environment in our state, a strong economy and the continued growth of e-commerce.”
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, finishing 2018 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 in 2018 with more than 7.3 million square feet of new big-box leasing activity, 7.2% higher than the previous year. Robust leasing kept absorption positive for the 10th consecutive year, at 5.3 million square feet. Despite strong occupancy gains, a plethora of new development the second half of 2018 kept vacancy rates the same as 2017, finishing at 7.7%. New development had a slow start in the first half of 2018 with only 959,310 square feet completing, the lowest amount for the first half of a year since 2012. This drop in development was an anomaly, as nearly five million square feet completed construction
the second half of 2018. While development in 2018 was impressive, 2019 could dwarf it, as a record 7.3 million square feet was under construction at year-end. 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 2019. The Indianapolis market is set up for continued growth in the coming quarters. Taking rents for big-box space skyrocketed in 2018 to $3.76 per square foot per year, and while this trend looks to continue 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.
is the lowest in over a decade.
5.6% cap rate in 2018
NEXT: INLAND EMPIRE
PREVIOUS: I-4 CORRIDOR
1221 Alder Ave. Rialto, CA Investment $134.00 PSF
Liberty Property Trust 702,668 SF
4000 Mission Blvd. Ontario, CA User $82.00 PSF
Bridgestone Tire 923,100 SF
20901 Krameria Ave. Riverside, CA User $94.00 PSF
UPS 1,000,000 SF
4100 N Webster Ave. Perris, CA User $96.00 PSF
Ferguson Enterprises 1,039,899 SF
11281 Citrus Ave. Fontana, CA New-Direct
UPS 1,003,567 SF
490 Columbia Ave. Riverside, CA New-Direct
Nordstrom 1,009,092 SF
24400 Krameria Ave. Moreno Valley, CA New-Direct
Kenco Logistics 1,331,763 SF
24385 Nandina Ave. Moreno Valley, CA New-Direct
Lowes 1,387,889 SF
463 464 467 494 530 551 588 622 646 686
209,587,000 210,254,000 213,200,000 227,645,000 249,632,000 263,974,000 287,468,000 304,635,000 320,475,682 341,120,600
26,827,136 16,736,218 11,512,800 10,319,500 12,205,000 14,888,134 16,163,000 15,264,000 16,041,106 15,922,000
12.8% 8.0% 5.4% 4.5% 4.9% 5.6% 5.6% 5.0% 5.0% 4.4%
7,303,000 16,314,000 18,136,000 15,832,000 15,767,000 21,468,000 27,178,000 37,564,000 27,244,376 27,693,000
-6,250,000 11,897,000 10,678,000 3,600,000 10,640,000 12,168,000 17,374,000 17,883,400 15,706,700 20,764,000
$3.48 $3.36 $3.60 $3.72 $3.96 $4.32 $4.56 $4.80 $4.92 $5.04
7.2% 6.8% 6.2% 5.7% 5.2% 5.4% 5.2% 5.0% 4.8% 4.4%
2,225,000 667,000 – 2,513,000 6,718,000 19,152,000 21,710,000 16,981,000 14,873,610 22,500,000
667,000 – 2,763,000 2,100,000 16,049,000 14,648,000 14,717,000 15,606,000 18,575,203 17,788,000
Big-Box Buildings in Inland Empire (200K+ SF & 28' Clear)
116
134
21
436
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 in the Inland Empire sees no bounds as absorption levels continue to rise to new highs. With 2018’s net absorption 28% higher than 2017, vacancy levels continue to push downward year over year. Demand for consumer goods continues to be the largest driver of growing inbound port activity fueling the e-commerce, fulfillment and logistics industries with 3PLs as the largest big-box consumer throughout the Inland Empire. Rental rates continue to push higher each year above typical investor and developer-underwriting standards, which all combined, is driving frenzied demand for development sites that can produce anything larger than 200,000 square feet.”
California
The Inland Empire cemented itself in 2018 as the top big-box market in North America, and for good reason. At just over 340 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 massive amounts of new activity in 2018. Just over 27.7 million square feet of big-box product leased—the most in North America in 2018. This new leasing pushed overall net absorption up to 20.8 million square feet, the most for the region on record and also the most net absorption in North America in 2018. Robust demand in the region dropped the overall vacancy rate to a record low 4.4%. One of the Inland Empire’s top advantages is the amount of land available for development, especially in the Inland Empire East.
With demand at all-time highs, more than 22.5 million square feet of big-box space completed in 2018, another all-time record for the region. The pace of new development will only drop slightly in 2019, with 17.8 million square feet under construction at year-end. Insatiable demand continues to put upward pressure on taking lease rates, which finished 2018 with an average of $5.04 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 overall net absorption was an all-time record for a market in North America.
20.8 million square feet
NEXT: KANSAS CITY
PREVIOUS: INDIANAPOLIS
1820 Corrington Kansas City, MO Investment $65.00 PSF
Schafer Richardson 173,090 SF
17201 W 113th St. Lenexa, KS Investment $66.77 PSF
Exeter 354,055 SF
22101 W 167th St. Olathe, KS Investment $61.99 PSF
Sealy & Company 602,000 SF
420 SE Thompson Lee's Summit, MO User $32.50 PSF
Mid-States Distributing 800,000 SF
17700 College Lenexa, KS New-Direct
Turn5 Inc. 363,000 SF
30900 W. 183rd St. Gardner, KS New-Direct
Hopkins Manufacturing 406,000 SF
16231 Lone Elm Olathe, KS New-Direct
Professional Packaging 248,000 SF
5300 Kansas Ave. Kansas City, KS New-Direct
Overstock.com 513,000 SF
56 56 56 57 58 66 70 83 87 96
22,978,570 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
1,231,982 690,228 676,466 414,695 1,034,054 2,045,991 1,445,305 4,723,137 4,643,562 3,705,804
5.4% 3.0% 2.9% 1.8% 4.3% 7.5% 4.9% 13.3% 11.9% 8.8%
1,908,375 826,146 1,435,309 2,238,385 2,022,897 2,142,327 2,258,402 3,703,369 3,006,569 5,251,423
1,135,763 541,754 13,762 611,771 202,304 2,084,709 2,647,255 2,968,336 3,343,712 3,672,198
$3.85 $3.85 $3.85 $3.71 $4.11 $4.05 $4.14 $4.24 $4.25 $4.19
8.5% 8.8% N/A 7.7% 6.9% 7.0% 7.6% 6.3% N/A 6.2%
1,107,000 – – 350,000 821,663 3,096,646 2,046,569 8,655,986 4,959,713 3,681,233
– – 350,000 821,663 1,961,624 2,443,448 5,427,032 7,891,565 3,535,661 6,202,004
Big-Box Buildings in Kansas City (200K+ SF & 28' Clear)
12
76
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 over 42 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. Driven by the need to quickly deliver products to consumers, big-box activity continues to increase in Kansas City. The market posted more than five million square feet of new leasing in 2018, the third consecutive year that leasing surpassed this amount. This activity, along with many build-to-suits that completed construction in 2018, drove up net absorption to a record high 3.7 million square feet in 2018. Despite a massive amount of speculative big-box development over the past eight quarters, vacancy dropped to single digits for the first time since 2015, at 8.8%.
Overall, 3.6 million square feet completed construction in 2018—however 2019 could double this with 6.2 million square feet under construction. Because of strong activity in Kansas City, and the potential for more in the coming year, investors are purchasing industrial product at a brisk pace with companies including Exeter and Sealy & Company expanding their portfolios here. This activity dropped cap rates to 6.2% at year-end. While new construction will significantly increase existing product on the market in 2018, much of this space should lease quickly. This will keep vacancy rates stable for the foreseeable future. The market continues to do well with all occupier types, evidenced by large leases from the e-commerce, manufacturing and 3PL sectors in 2018 and this will continue in the coming quarters. With demand from e-commerce expected to increase in the coming year, the Kansas City big-box market will thrive with higher levels of absorption projected for the foreseeable future.
NEXT: MEMPHIS
PREVIOUS: INLAND EMPIRE
4650 Shelby Dr., Southpark Distribution Center Memphis, TN Investment $43.79 PSF
Mapletree Investments Ltd 445,273 SF
4155 Holmes Rd. Memphis Oaks Memphis, TN Investment $46.94 PSF
Mapletree Investments Ltd 922,500 SF
455 Research Dr. Eastgate Bldg. 3 Southaven, MS Investment $48.70 PSF
Temansek Holdings Limited 947,620 SF
11624 S. Distribution Cv. Olive Branch Distribution Center Olive Branch, MS Investment $49.04 PSF
Lexington Realty Trust 1,170,218 SF
8734 Crossroads, Crossroad Distribution Center, Bldg. G Olive Branch, MS New-Sublease
Milwaukee Tool 701,706 SF
4755 Southpoint, Southpoint Distribution Center Memphis, TN New-Direct
Northwest Apparel Group 700,000 SF
Gateway Global Logistics Center Byhalia, MS New-Direct
Corelle 786,000 SF
11555 Silo Dr., Legacy Park, Bldg 3 Olive Branch, MS New-Direct
Olam Cotton 927,742 SF
144 144 146 149 154 159 161 167 174 183
77,987,477 77,987,477 79,488,355 80,852,747 84,194,845 87,516,087 89,929,328 93,764,881 97,928,191 103,173,986
9,361,555 8,308,676 7,132,435 8,273,068 8,283,279 8,902,717 6,357,863 5,480,778 5,095,764 7,729,640
12.0% 10.7% 9.0% 10.2% 9.8% 10.2% 7.1% 5.8% 5.3% 7.5%
8,281,758 8,130,232 9,161,038 11,356,460 8,056,137 9,079,866 13,275,016 14,644,257 12,479,331 13,002,831
2,174,061 1,052,879 2,677,119 223,759 3,331,887 2,701,804 4,958,095 4,712,638 3,216,644 3,943,599
$2.75 $2.65 $2.85 $2.95 $3.10 $2.80 $2.90 $3.10 $3.25 $3.50
N/A N/A 8.6% 7.8% 8.5% 7.5% 7.5% 6.0% 6.0% 6.0%
– – 1,500,878 1,364,392 3,342,098 3,321,242 2,413,241 3,835,553 2,831,630 6,577,475
– – 234,660 1,219,892 1,376,232 2,204,040 1,781,513 2,831,630 4,893,984 3,456,849
Big-Box Buildings in Memphis (200K+ SF & 28' Clear)
48
5
89
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.
Vice President, Asset Services Memphis
Tim Mashburn
“Known as “America’s distribution center”, Memphis serves as a major connector point for I-55 and I-40 and is able to reach 152 metro markets overnight via truck transportation. With over nine million square feet of new big-box leases completed in 2018, Memphis once again proves it is one of the best values in the country with rents below the national average. Thanks to its geographical advantage, economical rents and the 4Rs (rail, road, river and runway), developers currently have six million square feet of speculative big-box development under construction.”
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 in 2018. At year-end, 13 million square feet of big-box product leased in Memphis, 4.2% higher than 2017. Despite continued strong leasing, some large move-outs and new speculative development increased the overall vacancy rate in the region to 7.5%, its highest rate since 2014. The higher vacancy rate is temporary as there is already strong activity in the newly-constructed product, and most of this space is projected to lease in 2019.
A record 6.6 million square feet of big-box space completed in 2018, nearly double the previous record of 3.8 million square feet in 2016. Developers are banking on continued demand in the region, with an additional 3.5 million square feet currently in development. Not only are institutional investors building more in the region, they are also increasing their portfolios by purchasing existing stock. Lexington Realty Trust and Mapletree Investments both made major investments in the region in 2018, keeping cap rates at 6% for the third consecutive year. Despite an increase in the vacancy rate in 2018, 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 2019 as occupiers increase their presence near Memphis’ important logistics hubs. Because of this, look for newly constructed space to quickly absorb, dropping vacancy rates and keeping rents on an upward trajectory for the foreseeable future.
of construction completions in 2018 is the most in over a decade.
6.6 million square feet
NEXT: NORTHERN CALIFORNIA
PREVIOUS: KANSAS CITY
2920 & 2950 Cordelia Rd. Fairfield, CA Investment $116.14 PSF
Invesco 861,000 SF
8371 Rovana Cir. & 8670 Younger Creek Dr. Sacramento, CA Investment $79.15 PSF
Blackstone 904,020 SF
2801 Finch Road Modesto, CA User $35.21 PSF
G3/E&J Gallo Winery 1,846,050 SF
16900 W. Schulte Rd. Tracy, CA Investment $110.65 PSF
Colony Capital 1,888,627 SF
NEI, Bldg 17 Tracy, CA Build-To-Suit
Katerra 567,870 SF
IPC, Bldg 25 Tracy, CA Build-To-Suit
Lindt/Ghirardelli 708.080 SF
3303 Airport Wy. Manteca, CA New-Direct
Penske 840,000 SF
4532 Newcastle Rd. Stockton, CA New-Direct
Amazon.com 1,122,341 SF
170 171 172 174 175 179 185 193 206 226
70,152,710 70,440,710 71,645,985 72,188,538 73,695,987 75,364,625 78,467,367 83,027,489 89,338,440 98,543,419
9,009,185 8,706,545 7,507,925 7,262,915 9,393,732 8,629,366 5,659,437 5,182,285 7,273,108 8,098,641
12.8% 12.4% 10.5% 10.1% 12.7% 11.5% 7.2% 6.2% 8.1% 8.2%
5,115,839 3,512,862 5,750,290 4,772,877 3,621,946 5,635,866 7,490,222 5,266,954 8,474,662 10,826,188
-680,243 302,640 2,403,895 787,563 -623,368 1,641,466 5,248,811 3,093,067 4,596,623 9,456,516
$3.68 $4.74 $4.20 $4.49 $4.26 $4.55 $4.99 $4.42 $4.73 $5.55
5.9% 5.5% 5.3% 5.2% 4.5% 4.1% 5.8% 4.3% 3.9% 4.1%
1,994,893 288,000 – 200,022 1,017,353 1,668,638 2,780,177 4,964,400 6,041,404 9,204,979
288,000 – 200,022 1,017,353 1,668,638 3,772,861 4,394,847 6,040,779 8,047,592 8,145,077
Big-Box Buildings in Northern California (200K+ SF & 28' Clear)
39
10
164
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 have revolutionized international trade and that stimulate 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 San Francisco Bay Area
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 nearly 88% of the 9.4 million square feet that completed and where all of the top leases in 2018 resided. 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 record 10.8 million square feet leased in Northern California, increasing net absorption to a record 9.5 million square feet. Taking rents finished 2018 at an all-time high at $5.55 per square foot per year NNN. Taking rents fluctuate significantly depending on the market the building is located, however. East Bay taking rents finished 2018 at $9.36 per square foot per year, while Stockton and Sacramento produce much more economic taking rents of $6.00 per square foot per year and $5.64 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 the city of San Francisco could lead to some redevelopment and/or construction of multistory warehousing.
9.5 million square feet
NEXT: NORTHERN-CENTRAL NEW JERSEY
PREVIOUS: MEMPHIS
698 Route 46 Teterboro, NJ Investment $241.68 PSF
Goodman North America 616,992 SF
300 Ridge Rd. Piscataway, NJ Investment $169.73 PSF
DWS 725,400 SF
355-678 Davidson Mill Rd. Jamesburg, NJ Investment $135.62 PSF
Zurich Alternative Asset Management, LLC 733,678 SF
703 Bartley Chester Rd. Flanders, NJ Investment $63.03 PSF
Square Mile Management & Saadia Group 1,427,979 SF
950 Convery Blvd. Perth Amboy, NJ New-Direct
The RealReal 492,276 SF
115 Interstate Blvd. South Brunswick, NJ New-Direct
XPO Logistics 526,400 SF
1665 Jersey Ave. North Brunswick, NJ Renewal/Expansion
Pioneer Commodities 547,334 SF
586 Gulf Ave. Staten Island, NY New-Direct
Ikea 975,000 SF
176 177 179 181 184 198 202 210 225 248
76,037,043 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
13,123,520 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
17.3% 13.4% 9.0% 5.8% 5.3% 7.9% 7.6% 3.6% 2.4% 3.0%
7,348,514 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
1,582,916 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
$4.75 $4.62 $4.09 $4.56 $4.94 $4.65 $5.02 $7.27 $6.52 $8.17
N/A 8.3% 6.9% 5.1% 6.5% 7.5% N/A 5.2% 5.1% 6.1%
385,140 269,204 483,175 469,850 1,553,550 7,094,784 1,743,232 2,785,637 6,611,429 11,188,076
269,204 483,175 243,750 1,890,658 5,297,857 2,058,621 3,006,520 8,617,360 17,484,505 8,530,807
Big-Box Buildings in Northern Central New Jersey (200K+ SF & 28' Clear)
177
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 2018 at 3%, the lowest of any North American big-box market showcased in this report. Demand from both retailers and the 3PL industry kept new leasing activity robust in 2018 at 13 million square feet—an all-time record for the market, and the fifth consecutive year leasing surpassed 10 million square feet. Strong leasing activity raised overall net absorption to a decade high 10.2 million square feet at year-end. Low vacancy rates put significant pressure on taking rents, which finished at an all-time high of $8.16 per square foot per year NNN, an impressive 25% increase compared with the previous year. Investors also expanded their portfolios in the region with companies including Goodman and Zurich making large purchases.
Development was robust in 2018, with nearly all of the product hitting the market leased by year-end. A decade high 11.2 million square feet completed, and much of this space was located in the Central New Jersey market along the turnpike. Under construction product dropped by half compared with 2017, finishing the year at 8.5 million square feet. 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 drop to record lows despite the 8.5 million square feet under construction. 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.
per year NNN first year taking rent in 2018 is an all-time record high.
$8.17 per square foot
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. Of all the U.S. ports, the Port of New York and New Jersey is best positioned to take advantage of the increased imports and larger ships that have resulted from the newly expanded Panama Canal. The recent raising of the Bayonne Bridge to accommodate Post-Panamax ships should keep import volumes for the Port strong for the foreseeable future. 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.
Senior Managing Director Parsippany
John L. Donnelly
“New Jersey’s big-box industrial market ended 2018 with 11.2 million square feet of new construction, a 69% increase from the previous year. Of the 11.2 million square feet delivered this year, 79% already had pre-lease commitments. The largest building delivered this year was 1,346,088 square feet at 1 Brick Yard Road in Cranbury. The building was developed in a joint venture by Clarion Partners and Viridian Partners and was pre-leased to e-commerce giant Wayfair. Despite the vacancy rate increasing 60 basis points to 3% year over year, the market remains tight, and any new availability is welcomed by tenants in the market.”
NEXT: SOUTHERN NJ-EASTERN PA
PREVIOUS: NORTHERN CALIFORNIA
400 First Ave. Tolleson, AZ Investor $61.21 PSF
Exeter Property Group 1.026,000 SF
1055 Hanover St. Wilkes-Barre, PA Investor $41.20 PSF
LBA Realty 1,062,000 SF
25 Keystone Blvd. Pottsville, PA Investor $74.75 PSF
Exeter Property Group 1,267,500 SF
2086 Corporate Center Dr. W. Tobyhanna, PA Investor $72.68 PSF
Mapletree Investments Ltd 1,369,000 SF
TradePort 164 Wilkes-Barre, PA Built-To-Suit
True Value 1,000,000 SF
1101 E. Pearl St. Burlington, NJ Built-To-Suit
Amazon.com 1,016,000 SF
200 Corporate Center Dr. W. Tobyhanna, PA Built-To-Suit
NFI 1,048,380 SF
3419 Commerce Center Blvd. Bethlehem, PA Built-To-Suit
Quarate 1,087,200 SF
345 347 352 361 369 382 406 443 471 496
171,095,986 172,140,986 174,779,432 181,141,185 185,866,328 194,049,729 207,375,946 228,362,024 244,780,138 263,235,613
21,205,046 17,047,991 12,756,043 16,222,192 12,326,948 7,794,760 9,985,132 12,737,963 13,686,422 18,721,599
12.4% 9.9% 7.3% 9.0% 6.6% 4.0% 4.8% 5.6% 5.6% 7.1%
7,230,575 882,148 1,021,551 502,269 2,423,248 4,096,500 4,113,609 6,638,719 8,090,030 10,872,709
354,457 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
$3.55 $3.63 $4.01 $4.04 $4.08 $4.15 $5.04 $5.06 $5.11 $5.22
N/A N/A 8.1% 8.4% 7.6% 6.7% 5.9% 5.9% 5.7% 5.5%
3,659,781 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
1,712,000 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
Big-Box Buildings in Southern New Jersey - Eastern Pennsylvania (200K+ SF & 28' Clear)
108
15
288
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 U.S. 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 2017.
Senior Managing Director Conshohocken
Mark Chubb
“Newly delivered, large format spec buildings bumped up vacancy during 2018. The increasing size of speculative buildings allowed single buildings to impact the vacancy rates by a larger degree. However, there continued to be strong absorption and a healthy pipeline of requirements. Despite rising vacancy rates, rental rates continue to grow in most areas. Development continues to spread away from core areas along the I-78 and I-81 corridors, and more infill sites are in play along the I-95 corridor.”
Southern New Jersey
Eastern Pennsylvania
At approximately 263 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 13 million square feet of net absorption in 2018. E-commerce companies continue to expand within the region in droves with Amazon.com taking another million square feet, and NFI and True Value also taking large blocks of space in the market. Despite strong leasing and net absorption, the overall vacancy rate increased 1.5 percentage points to 7.1% at year-end because of a massive amount of speculative development. More than 18 million square feet completed construction in 2018, with another 22.5 million square feet in development.
Sales activity also continues to be strong for investors during the first half of the year. Mapletree Investment, Exeter and LBA all purchased one million square foot facilities and these transactions continued to push up sales prices, lowering cap rates in the region to 5.5%, the fifth-lowest rate in the country. With economic conditions in the U.S. stable in the near-term and the surrounding East Coast ports performing well, big-box fundamentals should remain healthy in the region for the foreseeable future. The seven vacant buildings larger than 750,000 square feet, along with a good chunk of the 22.5 million square feet of under construction product will be taken, meaning another year of positive net absorption. Taking rents will also continue its upward trend and the overall vacancy rate should stay at or near its current rate in the coming quarters.
under construction in 2018 is an all-time record.
22.5 million square feet
NEXT: TORONTO
PREVIOUS: NORTHERN-CENTRAL NEW JERSEY
3455 Argentia Rd. Mississauga, ON Investor $145.79 PSF
OPTrust Industrial Inc. 285,350 SF
6625 Tomken Rd. Mississauga, ON Investor $132.69 PSF
PIRET 339,502 SF
1880 Matheson Blvd. E. Mississauga, ON User $160.92 PSF
Cosa-Nova Fashions Limited 389,313 SF
2 Bramkay St. Brampton, ON Investor $192.59 PSF
PIRET 405,000 SF
2994 Peddie Rd. Milton, ON New-Direct
Kimberly-Clark 550,000 SF
86 Pillsworth Rd. Caledon, ON New-Directt
SDR Distribution Services 627,731 SF
400 Nugget Ave. Toronto, ON Renewal
Technicolour Home Entertainment 635,124 SF
Coleraine Dr. Caledon, ON New-Direct
576 580 582 585 590 596 600 603 607 615
216,081,339 217,010,213 217,500,775 219,516,783 222,203,834 224,320,580 226,162,325 227,352,258 230,617,779 233,250,145
13,658,860 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
6.3% 6.0% 4.5% 4.1% 4.0% 3.8% 1.9% 2.8% 1.6% 0.9%
840,634 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
3,146,845 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
N/A N/A N/A N/A N/A N/A $5.78 $6.01 $6.36 $6.91
N/A N/A N/A 6.5% 6.6% 6.8% 6.6% 6.0% N/A N/A
– – – 2,180,723 1,386,011 2,361,701 3,404,213 2,878,961 5,354,212 2,487,908
– – – 5,476,747 3769675 7,370,604 6,821,355 5,862,245 1,934,408 6,212,706
Big-Box Buildings in Toronto (200K+ SF & 28' Clear)
49
518
The 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 GTA continues to experience record rent growth and very strong demand, which may push big-box vacancy to 0% by mid-2019. More than 50% of 2019 speculative construction has already pre-leased. E-commerce, consumer product and food sectors are leading the absorption of speculative product. Currently, the GTA has the lowest supply pipeline of any major North American market.”
Canada
The Greater Toronto Area (GTA) 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 which increased slightly at midyear to 2.6% dropped to an almost non-existent 0.9% at year-end. There are still very few full building vacancies on the market, with only three options at year-end, none of which are larger than 500,000 square feet. Despite the low amount of full building vacancies, leasing activity actually picked up in 2018, finishing at a decade high 10.6 million square feet, double the 2017 total.
There might be no market in greater need of new big-box development than Toronto, and because of this, 6.6 million square feet was under construction at year-end. 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.
0.9% overall vacancy
NEXT: ATLANTA
PREVIOUS: SOUTHERN NJ-EASTERN PA
*Taking NNN rent is in CAD.
