The Unprecedented Industrial Building Boom and Its Impact on the U.S. Markets
The U.S. has witnessed an industrial building expansion like never before, starting from 2020, largely driven by the e-commerce surge and historically low interest rates. This period of growth has brought about significant changes in the industrial property landscape across the country, although not uniformly.
A Historic Expansion
Over the course of 2022 and 2023, the U.S. industrial property sector grew by an astonishing 1.3 billion square feet. To put this growth into perspective, it's equivalent to covering 22,600 football fields or replicating the entire industrial property mass of metropolitan Chicago. This rapid expansion is unparalleled, marking the most significant growth in any commercial property type in the U.S. over a two-year span in more than three decades.
The Surge in Big Projects
Developers have been keen on maximizing their investments, focusing on the construction of large projects. This has led to a noticeable increase in the availability rates of logistics properties, especially those over 500,000 square feet in size, in several key markets across the nation. Cities like Indianapolis, Philadelphia, Phoenix, Savannah, and Orlando have seen their availability rates soar past 20%.
Not All Markets Are Saturated
Despite the general trend of increasing industrial space, certain U.S. distribution hubs, including Detroit, Jacksonville (Florida), and Reno (Nevada), are experiencing a shortage of mega-warehouse spaces—those defined as larger than 500,000 square feet. This scarcity is projected to persist, potentially beyond 2024, due to a recent pullback in the commencement of new industrial construction projects.
Spotlight on Select Cities
Detroit: The Eastland Commerce Center stands out as the sole modern logistics property in Detroit's metropolitan area, offering over 500,000 square feet of available space for lease.
Jacksonville, Florida: Ranking 31st nationwide, Jacksonville’s stock of mega-warehouse properties may not seem extensive at 24.5 million square feet. However, with companies like Amazon and Walmart operating sizable logistics facilities, and considering Florida's rapid population growth and the long-term increase in import traffic at Jaxport, Jacksonville is fast becoming a critical distribution hub for the Southeastern U.S. The city's modern logistics space is among the tightest in the nation, underscored by Sam’s Club's recent lease of 1 million square feet, leaving no large logistics spaces available.
The industrial building boom has reshaped the U.S. landscape, creating opportunities and challenges across various markets. While some areas grapple with oversupply, others are strategically positioned to thrive as essential distribution hubs, reflecting the dynamic nature of the U.S. industrial property sector.
