Retailers and wholesalers are driving the trend towards larger big box warehouses, according to the commercial real estate services giant CBRE.
North American “big-box” warehouse transactions (defined as 200,000 square feet or larger) rose dramatically in 2021, intended to accommodate large amounts of merchandise to meet consumer demand and avoid future supply chain disruptions.
As retailers grappled with supply shortages in the early stages of the pandemic, new strategies emerged for hedging 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,” CBRE pointed out
Retailers and wholesalers catapulted to the top spot for big-box transactions, accounting for 35.8% of all activity, up considerably from 24.7% in 2020.
This dethroned 2020’s leader, ecommerce only users, which fell to third at 10.7% (down from 27.1%). Third-party logistics remained in second place, expanding its share from 25.8% to 32.2%. 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 ecommerce sales.”
In total, big-box transactions accounted for 450 million square feet, up 29% from 350 million square feet in 2020. Vacancy rates in this category fell to a record-low 3.4%, down from 4.6% in 2020.
Four major markets are tracking vacancies at less than 1%, with Los Angeles the lowest at 0.2%.
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.”