In a year marked with struggles and uncertainty due to a global pandemic and domestic political unrest, the U.S. industrial sector flourished against all odds. Largely fueled by the continued growth of e-commerce and occupiers’ commitment to maintaining a diverse supply chain, demand for industrial bulk space (100,000 square feet and greater) remained remarkably high. As evidence of the need for warehouse and distribution space, U.S. occupier activity in bulk industrial space totaled nearly 398.9 million square feet at the end of 2020, down just 5% from the record-setting 420.4 million square feet transacted at the end of 2019. A further indication of the increased need for bulk space lies in the rising size of occupier transactions. The average size of a bulk transaction was roughly 283,000 square feet, up 16% over the average size of 245,000 square feet in 2019.
Amazon arguably dominated real estate headlines throughout 2020, taking more space than ever before. In fact, for the first time, e-commerce occupiers accounted for nearly a quarter of all bulk activity during the year and the most of any industry. Third-party logistics and packaging companies (3PLs) dropped to the second spot, accounting for nearly 21% of activity. While overall industrial activity ran below 2019’s totals, there were 1,407 bulk transactions, including new leases, renewals and user sales at year-end 2020. Naturally, Amazon captured the top spot of bulk occupiers in the U.S., signing 173 transactions to occupy a whopping 87.9 million square feet – more space than they occupied between 2016 to 2019 combined. Both Home Depot and Lowe’s Home Improvement remained in the top 10, occupying 6.2 million square feet and 4.8 million square feet, respectively. Three 3PL providers also made it into the top 10 in 2020 – FedEx (5.7 MSF), Geodis (4.2 MSF) and DHL Supply Chain (3.4 MSF).
E-commerce only occupiers, like Amazon, continue to require additional space to meet the demand of consumers shopping from the comfort of their homes. While this shift in consumer preferences was largely pandemic induced, this trend is not likely to subside until a vaccine is widely available. We expect Amazon totals to remain elevated in 2021 as the company proceeds with its expansion plans. While e-commerce transactions more than doubled its footprint, the only other industry to grow over the last year was the food, beverage, and pet supply industry, which increased its square footage by nearly 14%.
Transactions in the Midwest accounted for 26.2% of all bulk occupier activity, followed by the Southeast with 23.3%. The Southcentral market activity was the slowest at the end of the year, accounting for just 11.2% of transactions signed, with the Northeast market following closely behind, responsible for 16.9% of activity. The Midwest continues to attract bulk occupiers who take advantage of its strong labor, transportation, and logistics benefits, with e-commerce users taking 20.5 million square feet in Midwestern states. Amazon expanded by 16.0 million square feet in the Midwest in 2020, with a variety of other e-commerce companies establishing a presence in OH, IL, WI, IN and MN. Population, labor growth and relatively low business costs continue to fuel activity in the Southeast region. In contrast, the West region remains in third, thanks to continued strong demand in the Inland Empire, boosted by surging e-commerce demand and 3PL activity.
As the industrial sector escaped 2020 relatively unscathed, transaction volume for bulk industrial space is expected to remain high in 2021, thanks to a need for modern industrial space for distribution. While 3PL and retail-related distribution volume will remain robust, look for the strong growth showcased in the Food and Beverage industry to continue, as many of these occupiers are looking to expand and modernize their distribution and manufacturing networks. If the projected economic rebound comes to fruition in 2021, bulk warehouse/distribution space will remain in high demand by e-commerce retailers and manufacturers for many quarters to come.
Company Type Description:
Construction, Improvement and Home Repair – Warehousing and distribution of materials used in residential and commercial construction, improvements and repair, could contain some e-commerce components.
Data Centers, Tech and R&D – The use of industrial space for data centers and non-pharmaceutical R&D purposes.
E-Commerce Only – Warehousing and distribution of product that is ordered online and shipped directly to the end consumer only.
Food, Beverage and Pet Supply – Manufacturing, warehousing and/or distribution of food and beverage related products. Could contain some e-commerce or manufacturing components.
Furniture and Appliances – Warehousing and distribution of retail and/or wholesale furniture and appliance products. Could contain some e-commerce and or manufacturing components.
General Retail and Wholesale – The warehousing and distribution or retail and/or wholesale products not listed in any of the other categories. Could contain some e-commerce or manufacturing components.
Manufacturing – Industrial space used for manufacturing and/or storage of raw materials and equipment used in the manufacturing of non-automobile related products.
Motor Vehicles, Tires and Parts – The warehousing, manufacturing and/or distribution of motor vehicles, tires, and related parts and materials.
Third-Party Logistics and Packaging – Third-party logistics (3PL) and packaging of a wide variety of products, could contain some e-commerce components.