So far this year more than half of the 100 biggest leases for warehouse space have been signed by manufacturers, distributors, retailers and other online sellers or their logistics services providers, says CBRE Group Inc., a large Los Angeles commercial real estate services and investment company.
Fifty-six deals for large amounts of warehouse space, in fact, were for e-commerce companies, CBRE says. That number, accounting for nearly 60% of all deals, breaks down for 23 deals by online sellers and 33 lease agreements for third-party logistics, or 3PL companies, says Adam Mullen, CBRE Americas leader of industrial and logistics.
“The supply chain arms race is as competitive as it’s ever been,” Mullen says. “While e-commerce is driving many new leases, there still is a solid diversity of users throughout the top 100 leases.”
Altogether, the 100 largest warehouse leases represented about 67 million square feet of space, CBRE says. Of that total, the square footage leased by for e-commerce use by various companies totaled about 40 million square feet.
Overall for all companies, the lease agreements ranged in size from 417,000 to 2 million square feet, while 30 of the 100 leases were for warehouses sized 750,000 square feet or more, reflecting demand for modern buildings that have become larger and taller in recent years.
70% of these leases were for new or relocated warehouse operations. Geographically, these transactions were spread across 28 markets, with Southern California’s Inland Empire, Atlanta and Chicago having the largest square footage amounts, CBRE says.
E-commerce companies in particular signed new warehouse leases for larger than 750,000 square feet. “30 of the leases were for warehouses larger than 750,000 square feet, reflecting e-commerce users’ preference for expansive facilities with high ceiling heights and, in many cases, modern specifications for automation and rapid movement of massive inventories,” CBRE says. “The strength of leasing to 3PLs shows that companies are striving to create the most flexible and nimble distribution networks possible.”
California’s Inland Empire was the metropolitan area with the most leases for the first six months of the year. California had 14 transactions spanning 11.6 million square feet, followed by Chicago (11 deals for 6.8 million square feet), Pennsylvania’s I-78/I-81 corridor (10 deals for 6.8 million sq. ft.) Atlanta (10 deals for 7 million square feet) and Dallas-Fort Worth (eight deals for 5.2 million square feet.)
CBRE didn’t include data for a year-over-year comparison. But as business-to-business and business-to-consumer e-commerce continues to grow, manufacturers, distributors, web merchants and others are going to be competing for more modern warehouse space.
“1.25 million square feet of logistics space is needed per $1 billion of annual incremental online sales,” says Mullen says. “This translates into approximately 184 million square feet of e-commerce logistics demand by 2020.”
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