The demand for large industrial and logistics warehouses has slowed down, resulting in a decline in the number of mega-leases of 1 million square feet or more in 2023, according to a recent report by CBRE Group Inc. (NYSE: CBRE), a leading real estate services firm.
Compared to a record high of 63 mega-leases in 2022, only 43 were signed last year, as economic uncertainties and changes in inventory management practices have put a damper on the demand for these massive facilities, according to data from CBRE.
Out of the top 100 leases, traditional retailers and wholesalers, who were previously leasing warehouse space at a rapid pace, only accounted for 30 leases in 2023, down from 53 in the previous year. Despite this decrease, they still represented the largest number of top leases, as reported by CBRE.
On the other hand, third-party logistics companies (3PLs) responded to the continued growth of e-commerce by signing 29 of the top 100 leases in 2023, a significant increase from the 11 leases they signed in 2022.
CBRE President of Americas Industrial & Logistics, John Morris, explains that the shift in inventory management from a “just-in-time” to a “just-in-case” approach due to the pandemic has contributed to the increased demand for warehouse space. However, he also notes that while demand remains strong, the number of mega-leases is expected to decrease in the near and mid-term.
The top markets for mega-leases in 2023 were the Interstates 78 and 81 corridor in central Pennsylvania, California’s Inland Empire, Chicago, Dallas-Fort Worth, Memphis, Tennessee, and Savannah, Georgia. Among these, the I-78/I-81 corridor had the most mega-leases with a total of 17.
In conclusion, while the demand for large industrial and logistics warehouses remains historically strong, the number of mega-leases is expected to decline in the coming years. Nevertheless, certain markets such as the I-78/I-81 corridor continue to show a high demand for these massive facilities.
