Combined, the northern, central and southern New Jersey markets, which include Eastern Pennsylvania, topped all markets in big-box leasing transaction volume in 2022, with more than 51 million square feet of leasing last year, according to a new report from CBRE.
The Southern New Jersey/Eastern Pennsylvania market ranked second in the nation, with 521 million square feet of existing inventory, fourth in leasing activity, at 32.6 million square feet, and second in new construction, with 45 million square feet of inventory added last year. The Northern and Central New Jersey markets ranked seventh nationally in big-box leasing activity, at 18.8 million square feet, fifth in existing inventory, at 367.8 million square feet, and fourth in rent growth year-over-year, at 36.2%.
“Even with stressed economic conditions, corporate contraction and tempering occupier demand, the Northern and Central New Jersey industrial markets remain fundamentally sound, albeit with some waning consumer sentiment,” CBRE Vice Chairman Thomas Monahan said. “The many threats we’re witnessing in the region, such as pauses in new construction starts, zoning restrictions, municipal aversion and delays in switch-gear and materials, provide an opportunity for existing inventory and inventory delivering in the near term.”
The Interstate 78/81 Corridor, southern New Jersey and Philadelphia markets remained active despite the explosive pandemic-driven demand finally showing signs of slowing. The region’s large population concentration, available land for development and significant logistics advantages continue to feed the markets’ strength, resulting in continued low vacancy, according to the CBRE report, which projects another strong year for the area.
Nationally, third-party logistics providers leased more big-box (200,000 square feet or larger) warehouse space in North America than any other occupier category. Accounting for 41% of all big-box lease transactions in 2022, 3PLs expanded their footprints and claimed the largest share for the first time since CBRE began tracking the activity in 2012.
3PLs typically operate companies’ logistics and warehousing operations on a contractual basis, gaining efficiencies by handling that work for multiple clients simultaneously. As a result of enduring pandemic-era shifts, companies have expanded their reliance on 3PL partners to create resilient supply chains and economically address customer needs.
The previous leader in big-box leasing activity — retailers and wholesalers — fell to second place, taking 35.8% of the leasing share. Food and beverage occupiers were a distant third, accounting for 8.7% of leasing activity.
CBRE analyzed warehouses of 200,000 square feet and larger because warehouses of that size are used for large-scale national and international product distribution. Encompassing the U.S., Mexico and Canada, the big-box report found that industrial facilities had record-low vacancy rates and unprecedented rent growth in 2022, despite record new construction deliveries. Demand was driven primarily by a desire to serve markets with growing populations, modernize space for automation and improve supply chain resilience.
Matching 2021’s record low, the 2022 direct vacancy rate was 3.3% at year-end, which supported first-year base rents growth of 23% year-over-year. With demand for space at a high, and little space available, a record 455 million square feet is currently under construction, of which 25.3% is preleased.
The Top 10 markets in North America, ranked by square feet leased, were:
- Inland Empire, 46.7 million square feet;
- Dallas-Fort Worth, 34.4 million square feet;
- Chicago, 33.5 million square feet;
- Southern NJ/Eastern PA, 32.6 million square feet;
- Atlanta, 27.6 million square feet;
- Houston, 19.1 million square feet;
- Northern/Central NJ, 18.8 million square feet;
- Phoenix, 16.4 million square feet;
- Indianapolis, 15.2 million square feet;
- Columbus, 14.9 million square feet.