The U.S. industrial market cemented itself as the most in-demand commercial property sector in 2020, fueled by a large increase in e-commerce sales due to COVID-19 restrictions. Demand for industrial buildings of all sizes surpassed 2019 totals but were strongest in mega-distribution facilities of 1 million sq. ft. or more. The top 100 transactions last year totaled 103.8 million sq. ft., 17% above 2019’s total.
E-commerce companies that exclusively ship directly to consumers led with 35 transactions totaling 37.3 million sq. ft.—nearly double the 18 signed in 2019. General retailers and wholesalers that distribute both to brick-and-mortar stores and directly to consumers accounted for 32 of the top 100 transactions totaling 35 million sq. ft., six less than in 2019. On a square footage basis, however, total transactions for this occupier type increased by 3.5%.
Figure 1: 100 Largest U.S. Industrial Transactions by Industry, 2020
Source CBRE Research, Q4 2020.
The rapid increase in e-commerce sales, combined with the need to keep more inventory onshore, increased the average transaction size of the top 100 deals in 2020 to 1,038,072 sq. ft.—well above the 887,496-sq. ft. average in 2019. A record 48 transactions for 1 million sq. ft. or more were signed last year, nearly double the 29 signed in 2019. In a further sign of increased demand for industrial facilities, only 18 of the top 100 transactions in 2020 were renewals—well below the 26 renewals in 2019.
Atlanta accounted for 13 of the top 100 transactions, followed closely by the Pennsylvania I-78/81 Corridor, Dallas-Ft. Worth and the Inland Empire—each accounting for 11 of the top 100. On a total square footage basis, the Pennsylvania I-78/81 Corridor led with 12.9 million and also had the most 1 million-sq.-ft. transactions (eight). Demand is robust in this market because it is one of the last in the Northeast with significant land available to develop.
Figure 2: Top 10 Markets
Source CBRE Research, Q4 2020.
The increase in big-box deal activity indicates that the outlook for industrial real estate is strong. E-commerce will be a demand driver for the foreseeable future, along with the need to hold additional inventory onshore to avoid supply disruptions such as those wrought by the COVID pandemic in early 2020. As a result, average transaction size likely will increase further in 2021.
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