E-commerce, Logistics Firms Lead Industrial Leases in 2018

Manufacturers and retailers have taken a back seat, accounting for a decreasing number of space commitments, the latest CBRE research shows.
 Ryan Keiser, Executive Vice President, CBRE
Ryan Keiser, Executive Vice President, CBRE

Composition of the industrial real estate sector’s leading tenancy is changing, according to a new report by CBRE, Dealmakers: E-Commerce & Logistics Firms Dominate Largest Warehouse Deals in 2018.

The presence of e-commerce and logistics firms in the industrial sector is on the rise, as evidenced by leasing activity in 2018. Last year, these companies signed 61 of the 100 largest lease agreements, taking a total of 61.5 million square feet of space. The numbers represent a notable jump from 2017, when e-commerce and logistics firms inked 52 of the largest leases for a total of 43.2 million square feet.

“These figures illustrate that there still is a lot of momentum behind e-commerce uses in U.S. warehouse leasing, despite concerns that the sector’s expansion may be reaching its later stages,” David Egan, global head of industrial & logistics research with CBRE, said in a prepared statement. “We expect this type of leasing momentum to continue in 2019.”

Manufacturers accounted for 13 of the top 100 lease transactions in 2018, representing 13.3 million square feet. Retailers were at the bottom of the list, recording just four of the largest transactions with 3.6 million square feet in signings.

As for location, Southern California’s Inland Empire, the leading industrial market in the U.S., logged 20 deals totaling nearly 19 million square feet. The PA I-78/81 Corridor in Eastern Pennsylvania was a distant second with 11 deals encompassing 11.8 million square feet, followed by Dallas-Fort Worth, which recorded 10 deals totaling 11.1 million square feet.

New trend afoot

CBRE’s analysis of the current market cycle concluded that the call for cutting-edge space is on the rise among industrial real estate users. Among the features high on tenants’ list are higher clear height and wider column spacing.

“These requirements are needed due to the more sophisticated MHE (Material Handling Equipment) that’s being utilized to meet the demands of e-commerce fulfillment, including more SKUs being warehoused that need to be picked accurately, packed, and on a truck as soon as possible to hit the delivery service levels demanded by the consumer,” Ryan Keiser, executive vice president with CBRE, told Commercial Property Executive.

CBRE expects the strong demand for industrial and logistics real estate to continue in 2019.

Image courtesy of CBRE