Big-Box Industrial Real Estate to Remain Stable in 2020, Though Changes Abound

Big-box industrial facilities face challenges and changes during the fluid COVID-19 situation, though the sector should remain stable in 2020, according to a new report.

“While there are some major factors affecting the broader U.S. economy, the need for stronger omnichannel strategies should keep industrial real estate demand active in the coming year,” Colliers International says in its North America Big-Box Market Report 2019 Year-End Review and Outlook.

Accelerated growth by e-commerce and third-party logistics companies, among others, helped 2019 maintain its stability.

E-commerce, with its hunger for supply-chain storage space, is expected to grow more in 2020. It expanded in 2019 from 10.1% of total U.S. retail sales to 11.4%. In 2020, the COVID-19 pandemic continues to drive shoppers out of brick-and-mortar stores and to online retailers to a greater degree.

A recent CBRE report said e-commerce is driving huge demand for industrial space as a result of the pandemic. Rather than being temporary, the switch from in-person to online shopping is expected to stick. That demand, however, will take some time to meet.

Third-party logistics and packaging companies led in bulk occupier activity, at 25.1% of bulk transactions. That compared with 23.7% for general retail and wholesale.

“The 3PL industry is expanding its distribution capabilities and will be a major demand driver going forward,” the Colliers report said.

For big-box industrial activity, California’s Inland Empire reigns as the continent’s best performing market. It saw 36 million square feet of new leasing activity last year.

Its West Coast location ties the Inland Empire to China, which will play a central role in potential changes to the big-box market, Colliers said. The firm expects imports to be weakest in the early parts of 2020, with West Coast ports feeling the hit more so than East and Gulf coast ports.

For industrial space in general, not just big box, changes to the supply chain brought on by the COVID-19 pandemic will result in strong demand, according to research from CBRE.