Rising vacancies and falling net absorption have plagued the nation’s biggest big-box industrial markets, as new warehouse and distribution facilities were added at a rate not seen before. But the tide could turn this year after a rough 2024, after the two categories hit their peak.
Colliers’ newly released outlook for the sector in 2025 found that the 20 largest North American big-box markets have added an unprecedented 1.3 billion square feet of new supply since 2020 – expanding the market by almost 50%. But this activity also produced unfortunate consequences: too much supply and not enough demand.
“Net absorption, a key measure of demand for industrial space, reached 101 million SF in 2024 — a 34% drop from the previous year and 72% below the 2021 peak demand of 356 million SF. At the same time, developers delivered 202 million SF of big-box space, twice the amount of demand. Although this is 38% below the record 329 million square feet completed in 2023, the market has yet to regain balance,” the report stated.
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The report defines big-box industrial space as “modern distribution and warehouse buildings 200,000 square feet or more with ceiling heights of at least 28 feet clear,” and notes that they have experienced most of the development activity since the pandemic. This definition includes three categories: facilities of 200,000 to 499,00 square feet, 500,000 to 749,000 square feet, and 750,000 or more square feet. The largest facilities attracted more than half the net absorption in 2024, while demand was weakest in the mid-sized facilities.
Nationally, big-box vacancy rose by 80 basis points over the year to 11%. It was highest in buildings between 500,000 to 749,000 square feet at 11.7% and lowest in the 750,000-plus square feet category at 10.2% -- 159 basis points lower than the previous year. Total net absorption was 101.3 million square feet, 51.3 million square feet less than in 2023. Space under construction fell 90 million to 105.4 million square feet – the lowest level since 2015.
Still, the prospects for the year ahead seem brighter. “Big-box vacancy is expected to peak and begin to fall again in 2025 as new supply falls in line with levels of demand and the market adjusts,” the report stated.
Triple-net rental (NNN) rose 41 cents to $8.78 per square foot. “Rent growth has slowed: average big-box rents increased 5% year-over-year, well below rent growth in 2022 and 2023, when it exceeded 20% year-over-year,” the report stated. In total, 220 million square feet in new leases were signed, almost half of it for the smallest facilities.
Despite the challenges facing the big-box industrial market, the report noted that new locations continue to emerge. “While core markets — the Inland Empire, Dallas-Fort Worth, Atlanta, Chicago, Northern-Central New Jersey, and Eastern Pennsylvania Tri-State — remain favorites by occupiers, many secondary markets are also emerging, typically close to the fastest-growing population centers and the most-used logistics hubs in their regions,” it commented.
Other major markets ranked by their big-box inventory include Toronto, Indianapolis, Charlotte, Northern California, Houston, Memphis, Phoenix, Tampa/I-4 corridor, Columbus, Cincinnati, Kansas City, Greenville-Spartanburg, Seattle and Nashville.
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