Big Box Industrial Demand Reaches New High
Demand for big box industrial buildings, as measured by net absorption—or the net change in occupancy—set a new record for the current cycle in 2019, totaling 17.4 million square feet. This figure eclipsed the previous record of 16.1 million square feet recorded in 2016 and was bolstered by 20.8 million square feet of new leases and lease expansions signed during the year in the market’s biggest, most modern industrial product—also a record for the cycle.
The vacancy rate correspondingly fell by 54 basis points over the year to 8.53 percent, the lowest it has been since the second quarter of 2017. The record absorption and new leasing volume recorded would have pushed the vacancy rate down even further, but developers delivered 40 new big box buildings totaling 17.5 million square feet during 2019, the most since 2017 when 20 million square feet of big box product was delivered.
Twenty-seven of the 40 buildings delivered over the course of the year were built on a speculative basis, totaling 11.5 million square feet. At the end of the year, this new speculative product was 33.5 percent leased, meaning 7.6 million square feet of brand new big box vacancy was introduced to the market in 2019.