JLL’s inaugural Big Box Velocity Index says, that demand for U.S. industrial distribution centers larger than 300,000 square feet is high and rising. Improving economic conditions, the continuing growth of e-commerce and a deep bench of tenants seeking space has created a highly competitive fight for industrial and warehousing space. As a result, there are 96.7 million square feet of industrial construction underway, with nearly half speculative, with an average building size of 360,000 square feet.
The Market Movers:
WHO: At the top of the list of industries fueling demand include retail, especially e-commerce retail players and the logistics & distribution and manufacturing sectors. However, retail (traditional retailers through consumer non-durables) accounts for more than one third of total demand with most concentrated in the Northeast – particularly New Jersey and Philadelphia.
WHAT: A resurgence in activity from distribution space users has manifested in rising demand in two primary categories: the 250,000 to 499,999-square-foot range, and in facilities of more than one million square feet. Together these two categories comprise more than half of the requirements from tenants in the marketplace.
WHERE: Traditional distribution corridors are showing strong market conditions, however the Northeast is seeing the majority of activity. Five of the top six industries with space needs are looking in this region with many in the market for spaces in excess of one million square feet. In the Midwest, however, tenant requirements (on a square footage basis) are down by 26 percent owing to robust leasing activity in quarters past.
WHEN: There have been 14 consecutive quarters of positive net absorption, bringing vacancy rates down. Construction activity began to increase during the first half of 2012 and much of this stemmed from committals prior to groundbreakings. More speculative development is currently underway.
WHY: It’s no surprise that the retail sector comprises more than a third of our growth. The demand from e-commerce is shaping the market more than ever before, and is influencing the requirements of both users and the institutional investors who make speculative construction possible.
Read more in the JLL Big Box Outlook Report or contact:
Kris Bjorson, SIOR
T +1 773.458.1397