Big Box Boom

March 8, 2016

The industrial sector has seen significant growth in the past year, much of it due to the demands of e-commerce and tight delivery deadlines. However, the boom isn’t limited to small warehouses near major metropolitan markets. In fact, recent reports show that big-box distribution centers are now one of the most sought-after investment properties in the country.

The Wall Street Journal reports that construction of new big box warehouse space, or facilities with more than 300,000 square feet with ceilings measuring 28 feet or higher, increased almost six times in four years to reach 61 million square feet in 2015. Plus, they project an additional 74 million square feet will be complete in 2016.

This is a significant surge, especially considering that annual new construction figures for the entire country were below 10 million square feet as recently as 2011. Now, it’s a figure that single markets are exceeding.

The report holds additional good news for those with industrial space in their real estate portfolios: with nearly 93 percent of the space occupied, the average rent per square foot jumped 28 percent to $4.54 between the years of 2011 and 2015.

A boom in the big-box industrial sector is a major turnaround from its market position during the financial crisis. Not only are there a record number of construction deliveries, but absorption and rental rates across markets are both showing strong numbers as a result of demand.

All of this growth comes as more and more domestic consumer spending is happening online. National retailers, such as Home Depot Inc., Target Corp. and Wal-Mart Stores Inc., are racing to outfit massive fulfillment centers that can efficiently manage logistics for these purchases. Many of these centers are going up near urban areas, as well as ports and rail lines.

St. Louis and other midwestern markets are in a strong position to take advantage of these conditions. If you’d like to investigate the industrial opportunities that exist in your area, contact the professionals at Intelica Commercial Real Estate. We can help you evaluate the options to create the greatest advantages for your portfolio.