Big Box, High Velocity: Five trends behind the industrial real estate bullet train

According to Jones Lang LaSalle’s (JLL) first Big Box Velocity Index, demand for U.S. industrial distribution centers, larger than 300,000 square feet (known as “big box” space) is high and rising. Improving economic conditions, the continuing growth of e-commerce and a deep bench of tenants seeking space have all created this highly competitive fight for industrial and warehousing space.

By ·

According to Jones Lang LaSalle’s (JLL) first Big Box Velocity Index, demand for U.S. industrial distribution centers, larger than 300,000 square feet (known as “big box” space) is high and rising.  Improving economic conditions, the continuing growth of e-commerce and a deep bench of tenants seeking space have all created this highly competitive fight for industrial and warehousing space.

As a result, there is 96.7 million square feet of industrial construction underway, with nearly half speculative, with an average building size of 360,000 square feet.

The JLL Big Box Outlook Report featuring the Velocity Index cites five key trends that are shaping the 2013 U.S. Big Box Industrial Market – and creating markets that are winners and losers.

Richard Thompson, JLL’s executive vice president of the global supply chain practice, said that half of new construction is speculative, and highly specialized.

“With freight rates expected to go up, and with the ongoing trend of re-shoring, our findings did not come as much of a surprise. Shippers are seeking to optimize their relationships with 3PLs, too, with centralized warehousing.”

At the top of the list of industries fueling demand include retail, especially e-commerce retail players, and the logistics & distribution and manufacturing sectors. However, retail (traditional retailers through consumer non-durables) accounts for more than one third of total demand with most concentrated in the Northeast – particularly New Jersey and Philadelphia.

“With e-commerce sales expected to more than double over the next four years, we anticipate increasing demand for highly specialized facilities,” said Craig Meyer, President of Industrial, JLL. “We are seeing a number of major retailers in the market looking for mega-fulfilment centers more than two million square feet near large population centers – especially in the major logistics markets in Pennsylvania or New Jersey, Atlanta, Chicago and of course, the Inland Empire.”

*A resurgence in activity from distribution space users has manifested in rising demand in two primary categories: the 250,000 to 499,999-square-foot range, and in facilities of more than one million square feet. Together these two categories comprise more than half of the requirements from tenants in the marketplace. 

*There have been 14 consecutive quarters of positive net absorption, bringing vacancy rates down.  Construction activity began to increase during the first half of 2012 and much of this stemmed from committals prior to groundbreakings. More speculative development is currently underway.

*Traditional distribution corridors are showing strong market conditions, however the Northeast is seeing the majority of activity. Five of the top six industries with space needs are looking in this region with many in the market for spaces in excess of one million square feet.  In the Midwest, however, tenant requirements (on a square footage basis) are down by 26 percent owing to robust leasing activity in quarters past.

“The Northeast is home to 55 million people, and this is appealing to retail distributors that want access to a lucrative market that a mega population offers: an expansive consumer base and an existing, intricate logistics infrastructure,” said Aaron Ahlburn, Director of Research, JLL Americas Industrial & Retail.  “Larger blocks of functional space are also more readily available here than in the neighboring Midwest, meaning tenants in New Jersey have more choice as opposed to facing competition for fewer large space options in Chicago.”


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

JLL · All Topics
Latest Whitepaper
Reduce Order Processing Costs by 80%
Sales order automation software will seamlessly transform inbound emailed and printed purchase orders into electronic sales orders that can be automatically processed into your ERP system with 100% accuracy.
Download Today!
From the June 2016 Issue
In the wildly unstable ocean cargo carrier arena, three major consortia are fighting for market share, with some players simply hanging on for survival. Meanwhile, shippers may expect deployment shifts as a consequence of the Panama Canal expansion.
WMS Update: What do we need to run a WMS?
Supply Chain Software Convergence: Synchronization Realized
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Optimizing Global Transportation: How NVOCCs Can Use Technology to Operate More Profitably
Global transportation isn't getting any easier to manage, especially for non-vessel operating common carriers (NVOCCs). Faced with uncertainties like surcharges—but needing to remain competitive when bidding against other providers—NVOCCs need the right mix of historical data, data intelligence, and technology support to make quick and effective decisions. During this webcast you'll learn how Bolloré Transport & Logistics was able to streamline its global logistics and automate contract management.
Register Today!
EDITORS' PICKS
Top 50 U.S. and Global 3PLs 2016: Technology Now the Key Differentiator
Following last year’s merger and acquisition frenzy, the speed of technology implementation by the...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo