Retailers Take Lead in Big-Box Warehouse Leasing, CBRE Finds

In a significant shift, retailers and wholesalers emerged as the primary lessees of big-box warehouse spaces in North America in 2023, comprising 36% of all transactions, according to a new report by CBRE. This marked a notable departure from the dominance of third-party logistics (3PL) providers in the previous year.

The report also noted an uptick in leasing activity within sectors such as automobiles, tires & parts, and building materials & construction. However, overall leasing activity experienced a decline of 15.8% in 2023.

Despite a peak in industrial construction activity, with a record-breaking 413 million sq. ft. delivered to the market, the vacancy rate doubled to 6.6%. Nevertheless, construction in progress plummeted to 208.4 million sq. ft. by year-end, halving from the previous year's total.

“There was naturally going to be a period of cooling in big-box leasing ... this cooling represents a move toward stabilization, and we expect a modest increase in lease transaction volume this year as the market settles.”

— John Morris

CBRE forecasts a 5% increase in big-box leasing volume for 2024, attributing the optimism to favorable market conditions for tenants. This projection suggests a potential rebound in demand as the market adjusts to the influx 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 to 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 analysis focused on “big-box” warehouses of 200,000 sq. ft. and larger, crucial for extensive national and international product distribution. The report observed higher asking rents for industrial facilities compared to previous years, with rent growth remaining robust at 15.9%, albeit lower than the 25.1% recorded in 2022.

A strategic imperative primarily drove the surge in leasing activity to bolster supply chain resilience, enhance access to burgeoning population centers, adapt spaces for increased automation, and support the ongoing expansion of e-commerce operations.

“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,” Morris added.

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