In 2022, the industrial leasing market experienced a surge, with over 63 leases being signed for a record-breaking 1 million square feet. This is a significant increase from 2021, where the average size for leased spaces was 1.05 million square feet. Despite the possibility of an economic slowdown, businesses are still leasing mega big-box facilities, and this trend is expected to continue in the current year.
One primary reason for this trend is the need for e-commerce and inventory protection capabilities. Many occupants are shoring up their operations to meet the growing demands of their customers. Besides, traditional retailers and wholesalers are also expanding their footprints to keep up with the growth in e-commerce and store more inventory.
Third-party logistics (3PL) operators are also making their mark in the leasing market, with 18 of the top leases in 2022 compared to just 10 leases in 2021. Among these, seven 3PL leases were for 1 million square feet or more versus just two in the previous year. However, e-commerce companies saw a decline in the number of top leases, with only 14 deals making it to the top 100 in 2022 down from 21 in 2021.
Inland Empire, CA, led all markets with 17 of the top 100 leases, with Chicago following close behind with 11. There was also a notable emergence of Savannah, which had six of the top 100 deals versus just one a year ago.
Interestingly, despite the general trend towards larger spaces, more occupiers are opting to remain in their current facilities, with 24 renewals in 2022 compared to 18 in 2021. However, leasing activity shows no sign of slowing down, with a strong likelihood of a higher demand for mega distribution centers in 2023.
In conclusion, the industrial leasing market has broken new ground in 2022, indicating continued growth and stability. Occupants’ need for bigger spaces is likely to continue, driven by e-commerce, inventory protection, and other related factors. Thus, businesses must remain vigilant and proactive in securing the right spaces to meet their growing needs.
