Retailers and wholesalers lead big-box industrial transactions in 2021 with dramatic jump in activity

Retailers and wholesalers increased North American “big-box” warehouse transactions (200,000 sq. ft. or larger) dramatically in 2021, adding large amounts of additional merchandise to meet consumer demand and avoid future supply chain disruptions, according to CBRE.

As retailers grappled with supply shortages in the early stages of the pandemic, new strategies emerged to hedge against future disruptions. The main course of action has been to increase domestic safety stock, which often requires taking more warehouse space to hold a greater amount of consumer products.

The result catapulted retailers and wholesalers to the top spot for big-box transactions, accounting for 35.8 percent of all activity, up considerably from 24.7 percent in 2020. This dethroned last year’s leader, e-commerce only users, which fell to third at 10.7 percent (down from 27.1 percent). Third-party logistics remained in second place, expanding its share from 25.8 percent to 32.2 percent. Transactions include leases and user sales.

“Securing large warehouses has been a key strategy for retailers to navigate supply chain constraints,” said John Morris, executive managing director and leader of CBRE’s Americas Industrial & Logistics business. “In response, retailers have increased their inventory to meet demand for both in-store purchases and increasing e-commerce sales.”

Overall Transaction Activity Soars

CBRE’s report examined the 23 most dynamic big-box markets in the United States, Canada, and Mexico. In total, big-box transactions accounted for 450 million sq. ft. of activity in these markets, up 29 percent from 350 million sq. ft. in 2020.

Vacancy rates in this category fell to a record-low 3.4 percent, down from 4.6 percent in 2020. Four markets in the report are tracking vacancies at less than 1 percent, with Los Angeles the lowest at 0.2 percent. The tight market has driven average first-year rents to $6.03, up from $5.19 in 2020.

Morris explains, “With vacancy so tight, retailers need to plan several years ahead. If you need a large block of space quickly, odds are only a few, if any, will be available.

Additionally, construction completions were down slightly in 2021 at 186.7 million sq. ft., compared to 194.4 million sq. ft. the year prior. However, some relief may be found in the construction pipeline, which is at a record 323.9 million sq. ft.

Chicago led all markets with 59.4 million sq. ft. of transactions. Houston had the highest percentage of its inventory absorbed in 2021 (11.1 percent).
                        *Totals include transactions of 200K SF and above

Market	2021 Total Square Feet Leased
Chicago	59.4M
Inland Empire	49.3M
Southern NJ – Eastern Pennsylvania	48.7M
Dallas-Fort Worth	44.5M
Northern-Central NJ	29.7M
Columbus	18.2M
Toronto	19.8M
Indianapolis	18.1M
Cincinnati	16.8M
Memphis	14.5M

“Consistent construction completions will be essential for sustained transaction activity in 2022,” said James Breeze, Global Head of Industrial & Logistics Research for CBRE. “The demand is there, but supply is extremely tight. If projects are delayed due to lack of materials or slow delivery from supply chain challenges, occupiers will find it difficult to make big moves.”