2022 Sets Record For 1 Million-Square-Foot Industrial Leases

Demand for industrial and logistics warehouse space is driving an increase in megawarehouses, according to a CBRE report analyzing the 100 largest leases in the industrial real estate sector.

The 100 largest industrial lease transactions last year included a record 63 deals for 1 million square feet or more — up from 57 in 2021.

“Despite an expected recession, the leasing of megafacilities is expected to remain solid this year as many occupiers continue to build out their e-commerce operations and sustain their inventory levels,” said John Morris, president of Americas Industrial & Logistics for CBRE. “Strong demand for megawarehousing centers is expected to continue in 2023, and a large number of construction completions will provide more opportunities for expansion.”

Traditional retailers and wholesalers accounted for 53 of the top 100 megaleases. The businesses are expanding their footprints to accommodate e-commerce growth and to hold more inventory to guard against supply chain disruptions.

Third-party logistics operators took second place, signing 18 of the top leases, up from 10 in 2021. E-commerce companies followed closely behind with 14 of the top 100, down from 21 in 2021.

The smallest lease in the top 100 was for 760,000 square feet.

The top markets for megaleases include mainstays like the Inland Empire, California, Chicago and Atlanta as well as growing markets such as Dallas-Fort Worth, Phoenix and Columbus, Ohio.

An increase in construction will provide more opportunities for expansion, particularly in markets with the highest rates of speculative developments such as Dallas-Fort  Worth, Atlanta, the Inland Empire, Phoenix and Indianapolis.

The U.S. industrial market saw record new deliveries in 2022, with 450 million square feet of space hitting the market by the end of the year and another 713 million square feet under construction, according to Commercial Edge’s January industrial report.

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Even so, the pace was not enough to keep up with demand, and the average vacancy rate for the top 30 markets decreased to 3.9%. That pushed the national average rents up to $7.03 per square foot, an increase of 6.3% year over year as demand outpaced supply. 

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