Buoyed by increased demand from third party logistics providers, the big box corner of the industrial market is poised for growth despite lingering economic uncertainty. While e-commerce growth has waned somewhat as of late, TPL and manufacturing activity has surged, offsetting that dip.
A new report from Colliers found that new development for bulk facilities reached 88.5 million square feet at midyear, and the firm’s analysts say that number will likely increase at the end of this year. As of midyear 2022, total product under construction totaled 308.4 million square feet at midyear, a 30% increase year-over-year.
“Core markets including the Inland Empire, Dallas-Fort Worth, Atlanta, Chicago, Northern-Central New Jersey, Southern New Jersey-Eastern Pennsylvania and Toronto continue to be the destinations of choice for many occupiers,” said Stephanie Rodriguez, national director of industrial services at Colliers. “We’re also seeing emerging markets near fast-growing population centers and highly-utlized logistics hubs in continue to grow.”
And third-party logistics increased its market share of bulk transactions in the U.S. to 31.4% at midyear, up from 29.9% one year ago, according to Colliers. In addition, “a resurgence in U.S. manufacturing is also benefitting the industrial sector,” analysts note. “This shift in occupancy resulted in more than 231.8 million square feet of occupancy gains at midyear, and nearly 92.5 million square feet of occupancy gains were recorded in the big-box market. This positive momentum in third-party logistics related to occupancy gains, is largely aided by more occupiers opting to outsource fulfillment and distribution.”
Chicago and Southern New Jersey-Eastern Pennsylvania both posted occupancy gains in excess of 10 million square feet at 11.8 million square feet and11.6 million square feet, respectively. On the flip side, the I-4 Corridor in Florida posted the least, at just 414,000 square feet, followed by Toronto
Capitalization rates remained steady over last year’s number at 5.5%, despite sales volume hitting $76.5 billion at midyear, up from $55.4 billion a year ago.
“The industrial sector firmly remains in the number two slot behind multifamily for total share of total deal activity,” said Amanda Ortiz, national director of industrial research at Colliers. “All but five of the top 25 industrial markets achieved new records for deal volume in the first half of the year, with the top five each transacting more than $2.5 billion in investments.”