U.S. Market
Big-Box Report
U.S. Research Report | 2023 Midyear Review & Outlook
The United States has endured a period of extreme changes over the last several years that have significantly altered the demand for big-box industrial facilities. The country experienced a dramatic hit to output during the initial stages of the pandemic. After the pandemic policy stimulus and a dramatic shift in consumer spending led to a surge in prices, in March 2022, the Fed began to orchestrate the most aggressive period of tightening monetary policy ever in the country to fight inflation. Although CPI inflation has dropped from 9.1% in June 2022 to 3.0% in June 2023, the swift pace of rate hikes is affecting all industries, leading to cooling demand for big-box industrial facilities.
While core markets — the Inland Empire, Dallas-Fort Worth, Atlanta, Chicago, Northern-Central New Jersey, and Southern New Jersey-Eastern Pennsylvania — continue to be favored by many occupiers, many secondary markets are emerging and are typically located close to the fastest-growing population centers and the most-used logistics hubs in the region.
In this unique interactive report, we examine the United States big-box industrial market through the first half of 2023, the six-core big-box markets and nine emerging secondary markets. We will highlight the fundamentals and look at demand factors, including demographics and logistics capabilities, and assess what lies ahead in the next few quarters.
Introduction
Unless otherwise specified, all report data is through midyear 2023.
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Supply chains are returning to normal after pandemic disruptions led to widespread changes for occupiers of bulk product throughout North America. Third-party logistics firms are in the forefront of occupier demand for bulk space, overtaking e-commerce with a 32.9% market share of bulk sales in the U.S. at midyear, up from 31.4% one year ago. However, demand for big-box space cooled significantly during the first half of the year, as has overall industrial space demand. The whole U.S. industrial market recorded 126.9 million square feet of positive absorption as of the second quarter, with big-box at 60 million square feet. Industrial is the most liquid asset class, recording higher sales volume in the second quarter than office and retail combined. Although sales have cooled after an exceptional couple of years, Q2 sales volume totaling $20.1 billion was still 24% ahead of the 2015–2019 quarterly average.
Overview
North American
Building Inventory
Historical Data
200,000 - 499,999 SF
4,055
Big-box buildings
207
Fully vacant
1,119
Big-box buildings
62
Fully vacant
500,000 - 749,999 SF
938
Big-box buildings
51
Fully vacant
750,000+ SF
Northern California
Toronto
Northern-Central New Jersey
I-4 Corridor
Atlanta
Kansas City
Greater Phoenix
Dallas
Columbus
Cincinnati
Chicago
Indianapolis
Houston
Southern New Jersey
Inland Empire
Memphis
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- Q2 2022 U.S. Industrial Report
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Historical data
“As we return to pre-pandemic fundamentals, Atlanta’s big-box market is poised to remain below historical vacancy rates due to a dramatic decline in construction starts (3.5 million square feet) in the first half of 2023. With no hint of an uptick in construction, because of headwinds in capital markets, and only moderate declines in construction costs, the supply side is relatively insulated, which should keep vacancy rates low and continue to moderate rent growth in the near term.”
Harrison Marsteller
Senior Vice President, Principal
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After consecutive years of record-setting absorption numbers, Atlanta’s bulk market appears to be retreating to its normal pace and ended the first half of the year with 3.4 million square feet. Leasing also slowed in the first half of the year, to 6.7 million square feet, on pace for the lowest annual total since 2015. Despite nearly 47 million square feet of new product since 2021, development remains robust, with almost 19 million square feet underway.
Leasing activity slows from pandemic surge but still shows signs of resilience
Georgia
Atlanta
401
Big-box buildings
31
Fully vacant
200,000 - 499,999 SF
146
Big-box buildings
2
Fully vacant
500,000 - 749,999 SF
157
Big-box buildings
8
Fully vacant
750,000+ SF
Building inventory
Charlotte
Chicago
Cincinnati
Columbus
Dallas
Eastern PA-Southern NJ
Houston
Indianapolis
Inland Empire
Nashville
NorCal
Northern-Central New Jersey
Phoenix
Seattle
Historical data
“The drive for new speculative development in Charlotte has historically been tied to rapid population growth since 2010. A 20% increase over the last decade, equating to 113 people moving here every day, makes it the eighth-fastest-growing metro in the country. To meet increasing consumption, large tenants such as Best Buy, Sherwin Williams, and Home Depot have decided to double down on Charlotte by occupying modern facilities in the 400,000-square-foot-t0- 650,000-square-foot range. The occupier cost for these big-box facilities is still relatively lower than the cost in other markets. Utility infrastructure, labor analysis, and cost are three main drivers in the decision-making, and our region has the “open for business” mentality for all those drivers. While construction starts have slowed in the first half of 2023, we expect these historical data trends to continue and are very optimistic that Charlotte’s big-box market will continue to be an invaluable part of the supply chain, through our transportation nodes and our international airport.”
Justin Smith, SIOR
Senior Vice President
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Over the past decade, strong population growth has propelled the Charlotte big-box market. More than three million square feet have been absorbed to date, 21% more than in the first six months of 2022. Development remains strong, and year-to-date, 5.8 million square feet have been delivered. With another 13 million square feet underway, development will easily exceed 2022 total deliveries of 6.2 million square feet.
Record-high occupier demand drives growth
North Carolina
Charlotte
291
Big-box buildings
6
Fully vacant
200,000 - 499,999 SF
48
Big-box buildings
2
Fully vacant
500,000 - 749,999 SF
30
Big-box buildings
5
Fully vacant
750,000+ SF
Building inventory
Historical data
“In the first half of 2023, the Cincinnati industrial market’s s decline in demand coincided with a large volume of new supply on the market. Notable completions include VanTrust Park 536 Building 2 and Corridor 75 Logistics Park, which alone contributed over one million square feet of new supply. Bulk absorption for the half was -407,126 square feet. The vacancy rate for bulk space rose by 4.1% YOY to 6.8% for the half, which can be attributed to the large volume of vacant speculative space delivered during the previous year. Construction is expected to taper off as existing projects continue to deliver. Developers are forecast to pause on new construction starts until their existing inventory is occupied. At the same time, construction costs are stabilizing as supply chains stabilize and demand slows. It is not clear when demand will pick up again from the recent decline, but as inflation continues to slow and economic uncertainties wane, demand could return in the second half of the year.”
John Gartner
Senior VP & Principal
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Despite recording over 400,000 square feet of negative absorption through the first half of the year, the Cincinnati big-box market remains well-suited to meet the growing demand for faster delivery and the accompanying need for warehousing and transportation. This year, 4.2 million square feet of new product was delivered, and another 4.2 million square feet is underway.
Returning to pre-pandemic norms
Ohio
Cincinnati
143
Big-box buildings
9
Fully vacant
200,000 - 499,999 SF
46
Big-box buildings
5
Fully vacant
500,000 - 749,999 SF
20
Big-box buildings
0
Fully vacant
750,000+ SF
Building inventory
Historical data
“The Columbus industrial market continues to see strong demand compared to other Midwest industrial markets, even in the face of all the negative headlines. Currently, Columbus is on pace for its second or third-best year ever for net positive absorption. Moving forward, the region’s strategic location (two major interstates; access to labor; and transportation costs) will continue to drive demand for industrial bulk buildings. Construction of bulk speculative buildings is coming to a halt given the ‘math problem’ created by the current state of capital markets, interest rates, construction costs, and lease rates.”
Michael Linder, SIOR
Vice Chair
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Strong momentum for the industrial big-box market continued at midyear for the Columbus market. Leasing increased 2% year-over-year, spurred by significant growth in third-party logistics. Development is running hot, at 7.9 million square feet this year, 178% higher than the same period a year ago. Lease rates trended upward, rising to $4.49 per square foot in the second quarter. Third-party logistics companies and national retailers continue to drive demand in the area.
Big-box activity continues to rise in deliveries
Ohio
Columbus
149
Big-box buildings
6
Fully vacant
200,000 - 499,999 SF
40
Big-box buildings
4
Fully vacant
500,000 - 749,999 SF
47
Big-box buildings
1
Fully vacant
750,000+ SF
Building inventory
Historical data
“In the first half of 2023, the Cincinnati industrial market’s decline in demand coincided with a large volume of new supply on the market. Notable completions include VanTrust Park 536 Building 2 and Corridor 75 Logistics Park, which alone contributed over one million square feet of new supply. Bulk absorption for the half was -407,126 square feet. The vacancy rate for bulk space rose by 4.1% YOY to 6.8% for the half, which can be attributed to the large volume of vacant speculative space delivered during the previous year. Construction is expected to taper off as existing projects continue to deliver. Developers are forecast to pause on new construction starts until their existing inventory is occupied. At the same time, construction costs are stabilizing as supply chains stabilize and demand slows. It is not clear when demand will pick up again from the recent decline, but as inflation continues to slow and economic uncertainties wane, demand could return in the second half of the year.”
John Gartner
Senior VP & Principal
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Despite recording over 400,000 square feet of negative absorption through the first half of the year, the Cincinnati big-box market remains well-suited to meet the growing demand for faster delivery and the accompanying need for warehousing and transportation. This year, 4.2 million square feet of new product was delivered, and another 4.2 million square feet is underway.
Returning to pre-pandemic norms
Ohio
Cincinnati
143
Big-box buildings
9
Fully vacant
200,000 - 499,999 SF
46
Big-box buildings
5
Fully vacant
500,000 - 749,999 SF
20
Big-box buildings
0
Fully vacant
750,000+ SF
Building inventory
Historical data
“While the DFW market is booming with over one billion square feet of total inventory, there’s concern over its rapid expansion. A substantial 36 million square feet of new supply has been delivered this year, with another 60 million square feet under construction. Despite this, DFW deal-making activity is robust, including 15 deals of more than 500,000 square feet in Q2 alone. This has helped maintain a relatively healthy vacancy rate of 7.2%. We expect a surge in net absorption in upcoming quarters, owing to DFW’s attractive business environment and growing population. While 2023 may show some market softness due to the influx of new buildings, the market remains healthy. We anticipate a return to record-low vacancy rates in 2024 and continued rent growth. For industrial tenants looking for opportunities, the market still has soft spots to explore.”
Ward Richmond
Vice Chairman
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Dallas-Fort Worth’s big-box market remains one of the strongest in the country. Although it absorbed over 10 million square feet and leasing is up 200% year-to-date, vacancy has climbed nearly 400 basis points since year-end 2022, as the market continues to lead the country in development. Year-to-date, more than 26 million square feet has already been delivered, eclipsing the 25 million square feet in all of 2022. Despite healthy demand, vacancy is expected to rise, as another 43 million square feet of new product is underway.
Robust DFW Market Defies Slowdowns
Texas
Dallas
426
Big-box buildings
27
Fully vacant
200,000 - 499,999 SF
111
Big-box buildings
11
Fully vacant
500,000 - 749,999 SF
81
Big-box buildings
9
Fully vacant
750,000+ SF
Building inventory
Historical data
“Market fundamentals for Eastern Pennsylvania, Southern New Jersey, and Northern Delaware remain strong. Vacancy has increased, but only to 6.3% after the delivery of 21.5 million square feet of new construction. Occupier demand remains strong, albeit moderated from 2021 and 2022, and preleasing has slowed, as occupiers are more cautious and have more building choices. The regional asking rent increased by over 10% since the end of 2022, but the double-digit growth of the last two years is expected to stabilize. Increased financing costs and an arduous and increasingly contentious approval process have already impacted construction starts and will continue to moderate development.”
Mark Chubb
Senior Managing Director | Principal
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While the market absorbed over 10 million square feet through the first half of the year, development added more than 21 million square feet, and vacancy rose above 5% for the first time in three years. At the end of the second quarter, 32.6 million square feet remained under development. Development will slow, however, as higher interest rates and a slower entitlement process delay projects.
Rebounding activity, slowing construction starts, strong rent
Pennsylvania / New Jersey
Eastern PA-Southern NJ
391
Big-box buildings
20
Fully vacant
200,000 - 499,999 SF
155
Big-box buildings
9
Fully vacant
500,000 - 749,999 SF
162
Big-box buildings
10
Fully vacant
750,000+ SF
Building inventory
Historical data
“The record big-box demand in Houston over the last three years has waned, and absorption numbers continue their slide. Build-to-suits and speculative leases are still getting done, but not at the breakneck pace and in the same quantity seen during that time. Yield requirements in the sevens and greater scrutiny on site fundamentals from equity and debt sources have slowed groundbreakings considerably. However, COVID-19 had an immensely positive impact on the Southeast U.S. industrial market that will help the region to weather the impending storm. Supply lines were shifted from the West Coast to the Gulf Coast, fueling exponential growth for key port cities in the region. That shift, coupled with the manufacturing and petrochemical industries, will aid Houston in retaining its place as one of the top industrial markets in the nation. Houston’s numbers will undoubtedly be off 20%–30% this year and into the next, but the resulting performance will still be in the metro’s top five best years ever.”
Robert Alinger, CCIM, SIOR, LEED AP
Vice Chairman & Principal
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Although 6.2 million square feet have been absorbed this year, 4.1% higher year-over-year, big-box demand is cooling following three record-setting years. Over 11 million square feet of new supply has been delivered this year, pushing the overall vacancy rate up 270 basis points over the last six months, to 6.3%. Vacancy rates are rising throughout the metro area, where nearly 11 million square feet have been delivered in 2023. Nevertheless, lease rates continue to increase, have climbed 10% this year, and stand at $9.80 per square foot triple-net.
Houston’s big-box leasing is holding steady in 2023, showing resilience despite softening
Texas
Houston
270
Big-box buildings
17
Fully vacant
200,000 - 499,999 SF
40
Big-box buildings
6
Fully vacant
500,000 - 749,999 SF
18
Big-box buildings
1
Fully vacant
750,000+ SF
Building inventory
Historical data
“With the ongoing uncertainty in the economy due to the Fed’s rate hikes, a potential recession, sustainable corporate earnings for consumer goods sales, and an upcoming election, the Inland Empire has cooled off. It has had its first quarter of negative absorption in over 13 years , placing net absorption at -26,818 square feet at midyear. With the absorption pullback, vacancy has increased to 2.5%, vs. 0.3% at midyear 2022, for buildings 200,000 square feet and above. There is 29 million square feet under construction; of that, 51% has been preleased and, on average, those leases were signed 12–24 months ago. For buildings over 500,000 square feet, 67% are preleased. There has been a recent pullback in construction starts in response, with only 1.6 million starts in Q2 2023 compared to the historical average of 5.6 million square feet. New requirements in the market have begun an uptick in leasing activity, offering some indicators that the market is stabilizing.”
Mark Zorn
Vice Chair
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Supply significantly outstripped demand at the start of 2023 in the nation’s largest industrial market. For the first time in 13 years, the Inland Empire recorded negative absorption in the second quarter. Tenants were significantly challenged to find space at the end of 2022, when only 1.1 million square feet was vacant. Six months later and after eight million square feet of new product delivered, more than nine million square feet is on the market. Presently, the overall vacancy rate stands at 2.5%, so taking rents continue to climb and have increased 25% year-over-year.
Vacancy ticks up as new supply hits the market
California
Inland Empire
436
Big-box buildings
16
Fully vacant
200,000 - 499,999 SF
140
Big-box buildings
1
Fully vacant
500,000 - 749,999 SF
129
Big-box buildings
3
Fully vacant
750,000+ SF
Building inventory
Historical data
“The Nashville big-box market has been steady through midyear 2023. A lot of the big-box developments have been demised to accommodate smaller tenants in the 30,000-to-130,000-square-foot range, which has remained a sought-after tenant size. Rates continue to rise due to demand and construction pricing. Even though leasing will not be as robust as 2022, I expect Nashville will have a solid second half of 2023”
Bill Buntyn
Senior Vice President
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Nashville’s big-box market continues to grow, by nearly three million square feet this year and with almost 5.5 million square feet under construction. Asking rents have climbed 13% in 2023, to $6.67 per square foot triple-net, despite a vacancy rate 190 basis points higher year-over-year. New construction in the Nashville market has reached upwards of $8 per square foot, a market high. Despite the vacancy rate of 8.1%, no building between 200,000 and 499,999 square feet is 100% vacant.
Rental Rates continue to climb In 2023
Tennessee
Nashville
84
Big-box buildings
0
Fully vacant
200,000 - 499,999 SF
36
Big-box buildings
2
Fully vacant
500,000 - 749,999 SF
11
Big-box buildings
1
Fully vacant
750,000+ SF
Building inventory
Historical data
“Northern California’s big-box industrial product continues to perform strongly in the marketplace. Due to a shrinking supply of developable land sites and a general slowdown of acquisitions over the past year (largely tied to the rising cost of capital), planned or in-progress developments continue to see strong leasing, with demand outpacing supply. Well-located and well-designed buildings throughout Northern California, whether new builds or second generation, are leasing at historically high rates.”
Nick Ousman, SIOR
Executive Vice President
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Strong demand across Northern California continued, with 4.2 million square feet of year-to-date net absorption, just over 5% below 2021’s record pace. As demand still outpaces supply, asking rents continue to rise across all markets. The overall vacancy rate has fallen 30 basis points this year to 6.8%, as demand easily outpaced the 2.5 million square feet of new product. New projects are expected to outperform, as a limited supply of developable land will continue to moderate the pace of development.
Market Fundamentals Stand Firm Despite Economic Headwinds
California
NorCal
224
Big-box buildings
10
Fully vacant
200,000 - 499,999 SF
61
Big-box buildings
6
Fully vacant
500,000 - 749,999 SF
32
Big-box buildings
0
Fully vacant
750,000+ SF
Building inventory
Historical data
"Over the past three years, the Phoenix Industrial Market has set records for net absorption, as last year’s absorption exceeded 27,000,000 SF. Like most tier-one distribution markets, Metro Phoenix absorption outpaced deliveries. This was aided by occupiers leaving California and relocating to Arizona, taking large blocks of space.
Phoenix will see a significant uptick in new construction delivering through 2023 and the first half of 2024 (49 million SF). With these deliveries, vacancy will increase from a low of 2.8%, pushing to 6-7%. We will move through the current inventory with minimal new starts expected on the development front.
Our well-positioned labor pool and low occupier costs will continue to benefit the market. Competition will add pressure to rents in the big box market into 2024; however, the sun will shine on the Phoenix Industrial Market."
Don MacWilliam, SIOR
Vice Chair
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Spurred by the semiconductor industry boom, Phoenix’s industrial market remains strong since occupiers continue to relocate there, but is showing signs of demand moderation, particularly in buildings of more than one million square feet. Overall vacancy has dropped 280 basis points this year, to 4.9%, but a wave of new construction is set to be delivered. Most development is in the West Valley, where six of the seven one-million-square-foot-plus buildings are. Despite the significant drop in vacancy, lease rates have only risen 5.5% this year.
Rental Rate Increases Have Not Softened
Arizona
Phoenix
139
Big-box buildings
5
Fully vacant
200,000 - 499,999 SF
34
Big-box buildings
1
Fully vacant
500,000 - 749,999 SF
27
Big-box buildings
0
Fully vacant
750,000+ SF
Building inventory
Historical data
“The Seattle area has seen historic levels of rent increases, net absorption, and construction activity in the last 3 years. This year, inflation is catching up to consumers, which cuts into demand for warehouse and distribution facilities across the country, and Seattle is not immune. Pre-leasing of more than one-third of the development pipeline is a buffer against decreased demand. Recent completions and currently under construction combined gives 25 options in the metro for 200k+ leasing, which won’t last beyond 18 months. Vacancy might be higher than it was a year ago, but there are no signs for concern in the current environment for owners and occupiers of big-box facilities.”
Bill Condon, SIOR, NAIOP
Vice Chairman
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Big-box demand cooled during the first half of this year, and the market recorded just under 500,000 square feet of net absorption and less than two million square feet of leasing. The only 1.7 million square feet under development is the lowest level of construction since 2015. Although the vacancy rate has climbed to 5.3%, 230 basis points higher this year, it remains well below its 10.5% rate in 2019.
Vacancy rises and construction slows
Washington
Seattle
173
Big-box buildings
11
Fully vacant
200,000 - 499,999 SF
19
Big-box buildings
0
Fully vacant
500,000 - 749,999 SF
9
Big-box buildings
0
Fully vacant
750,000+ SF
Building inventory
Atlanta
Charlotte
Chicago
Cincinnati
Columbus
Dallas
Eastern PA-Southern NJ
Houston
Indianapolis
Inland Empire
Nashville
NorCal
Northern-Central New Jersey
Phoenix
Seattle
Historical data
“The market for big-box product in Indianapolis remains dynamic, propelled by robust underlying factors such as attractive incentives and tax structures, an ideal location within the country, extensive and well-connected state interstate systems, and a well-qualified and cost-effective labor workforce. Both developers and investors have shown a high level of optimism because of these foundational elements, resulting in a substantial inventory for potential occupiers. This range of available properties empowers occupiers with a variety of options within the metro that could align with their business requirements.”
Jimmy Cohoat, SIOR
Senior Vice President
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The vacancy rate has increased by 250 basis points this year and 630 basis points since year-end 2021 during a record-setting wave of new deliveries, 35.2 million square feet over the last 18 months. Although occupiers absorbed nearly eight million square feet this year, the vacancy rate hit 12.3%. Despite rising lease rates, construction is cooling, and the 11.7 million square feet underway is the lowest since 2020.
New construction slowing amid rising vacancy
Indiana
Indianapolis
155
Big-box buildings
12
Fully vacant
200,000 - 499,999 SF
79
Big-box buildings
8
Fully vacant
500,000 - 749,999 SF
61
Big-box buildings
9
Fully vacant
750,000+ SF
Building inventory
Historical data
“It is still a good time to be the owner of big-box warehouse space. The big-box market remains very strong, although it has slowed down from the unprecedented run that was created by the pandemic and the need for e-commerce space. The peak occupancy levels occurred in 2001 when vacancy rates touched 1% or less, creating an increase in rent prices of over 200% from 2013 levels. Vacancy rates are still low enough that Landlords are not feeling pressure to lower rates. While rates are holding firm, the yearly increases, which peaked at 5%, are now being scaled back to 3% to 3.5%.”
Doug Bansbach
Executive Managing Director
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After several outstanding years, New Jersey’s industrial market is retreating towards its pre-pandemic pace. Even though leasing has dropped nearly 29% year-over-year, landlords remained aggressive, pushing rents 12% higher this year. While 3.6 million square feet have been absorbed this year, the overall vacancy rate has climbed 70 basis points, to 5.1%, as over five million square feet have been delivered this year, four million in the second quarter alone. Although the supply of sublease space has climbed to 5.2 million square feet, a 138% increase year-over-year, the total only accounts for 0.8% of the market’s entire inventory.
Leasing activity shifts, sublease supply rises and rental rates hold aslandlords maintain pricing power
New Jersey
Northern-Central
New Jersey
226
Big-box buildings
10
Fully vacant
200,000 - 499,999 SF
52
Big-box buildings
2
Fully vacant
500,000 - 749,999 SF
48
Big-box buildings
2
Fully vacant
750,000+ SF
Building inventory
Historical data
“Developers started construction on more space than they delivered during the second quarter, and new supply pushed Chicago’s big-box vacancy rate higher for the fifth consecutive quarter. Despite the increase, new leasing in big-box product remained impressive, with 5.7 million square feet leased during the quarter, including four new leases of 500,000 square feet or larger.”
Jack Rosenberg, SIOR
Executive Vice President
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Rising from a low vacancy of 2.9% last year, the vacancy rate has climbed to 5.1% as new big-box supply outstrips demand. The metro area bulk market has absorbed over 8.5 million square feet this year, delivering just over 12 million square feet. With another 29 million square feet underway, vacancy will continue to rise over the short run, when supply and demand are expected to reach equilibrium. The long-term big-box outlook remains bright here, as the market claims 70% of the nation’s rail and intermodal activity.
New supply pushed big-box vacancy higher for fifth consecutive quarter
Illinois
Chicago
547
Big-box buildings
27
Fully vacant
200,000 - 499,999 SF
112
Big-box buildings
3
Fully vacant
500,000 - 749,999 SF
106
Big-box buildings
2
Fully vacant
750,000+ SF
Building inventory
