Phoenix was named the top growth market in North America for large-warehouse leasing activity in the industrial sector, with 9.1 percent of its inventory absorbed in 2020, according to a new report from CBRE.
Transaction activity reached a record level for big-box warehouses – those of 200,000 sq. ft. or larger – amid user demand stoked by growth in online shopping and retailers stockpiling inventory due to the pandemic. Transactions in this category cumulatively spanned 349 million sq. ft. in the top 22 North American markets last year, up significantly from 280 million sq. ft. in 2019. The study includes markets with more than 75 million square feet of big box product.
Phoenix was named a top-10 market for overall transaction activity, registering 13 million sq. ft. of transactions in this category. Additionally, Phoenix has 8.3 million sq. ft. of big-box space under construction. With demand surging, pr-eleasing for this new space in Phoenix is already at 48.4 percent.
“Phoenix continues to set new pricing records as demand from institutional, private and foreign investors continues to identify the metro area as a target market,” said CBRE Executive Vice President Joe Cesta. “Strategically located, with the ability to quickly reach consumers across the western U.S. and benefiting from occupiers and residents leaving more challenging regulatory environments in coastal states, Phoenix is forecast to lead the country in rent growth over the next five years.
California’s Inland Empire led all markets with with 42.5 million sq. ft. in transactions, followed by Southern New Jersey and Eastern Pennsylvania (41.8) and Chicago (41.1).
Across the board, all categories of large warehouse users increased their big-box activity last year. E-commerce-only users accounted for 27.1 percent of big-box transactions by square footage, followed by third-party logistics (25.8%) and general retail and wholesalers (24.7%).
“We expect 2021 demand to be just as strong, if not stronger, than 2020,” said James Breeze, Global Head of Industrial & Logistics Research for CBRE. “With most markets now in need of new supply to meet demand, the main concern is on the supply side as much of the under-construction product is already leased. Companies looking to expand, especially in facilities larger than 750,000 sq. ft., may struggle to find adequate space.”