Retailers and wholesalers are the top warehouse tenants
General retailers and wholesalers leased the most big-box warehouse space in North America last year.
According to new data from CBRE, general retailers and wholesalers made up more than a third (36%) of all transactions, dethroning last year’s top category occupier, third-party logistics (3PL) providers. Automobiles, tires & parts and building materials & construction also saw an increase in share of leasing activity, which overall fell 15.8% in 2023.
CBRE analyzed “big-box” warehouses of 200,000 sq. ft. and larger because warehouses of that size are crucial for extensive national and international product distribution. The report found that industrial facilities had higher taking rents than in years past. Rent growth remained robust at 15.9%, but down from 25.1% in 2022.
CBRE forecasts a 5% increase in big-box leasing volume in 2024 as current market conditions are favorable to tenants. This indicates a potential rebound in demand, as the market strives to catch up with the robust deliveries of newly constructed industrial spaces.
“There was naturally going to be a period of cooling in big-box leasing, which had reached unsustainable levels in recent years, due to e-commerce demand and companies electing to warehouse more inventory,” said John Morris, CBRE’s president of Americas industrial & logistics. “This cooling represents a move toward stabilization, and we expect a modest increase in lease transaction volume this year as the market settles.”
CBRE’s report examined 25 big-box markets in North America. The top 10 markets in North America, ranked by square feet leased, were:
Of the leasing activity that took place, CBRE says the demand was driven primarily by a desire to boost supply chain resilience, increase access to growing population centers, modernize space to accommodate increased automation, and support continued e-commerce growth.
“There were signs of increased demand for big-box space by year-end, and that trend has continued into Q1 2024,” added Morris. “We’ve seen a move from occupiers to keep inventory closer to their point of sale as they prioritize supply chain resiliency, which should benefit mid-size and big-box facilities alike. We also anticipate the slowdown in construction to support higher rents as the new inventory is gradually absorbed.”