General retailers and wholesalers leased the most big-box warehouse space in North America in 2023, accounting for 36% of all transactions and dethroning last year’s top occupier category, third-party logistics (3PL) providers.
According to a report from commercial real estate services firm CBRE, other categories that saw an increase in share of leasing activity were automobiles, tires & parts; and building materials & construction. The report analyzed “big-box” warehouses of 200,000 square feet and larger because warehouses of that size are crucial for extensive national and international product distribution.
Of the leasing activity that took place, 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.
However, the overall market fell 15.8% last year after industrial construction activity peaked in 2023, with a record 413 million sq. ft. delivered to the market, causing a doubling of the vacancy rate to 6.6%. That hot construction in progress rate dropped to 208.4 million sq. ft. by year end, half of the previous year's total.
“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 to more inventory,” John Morris, CBRE’s President of Americas Industrial & Logistics, said in a release. “This cooling represents a move toward stabilization, and we expect a modest increase in lease transaction volume this year as the market settles.”
Looking ahead, 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, the firm said.
“There were signs of increased demand for big-box space by year-end, and that trend has continued into Q1 2024,” Morris said. “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.”
