While the US economy has dangerously slumped for much of the year, demand for industrial space has only continued to increase.
Net absorption for bulk industrial space was up 51% to 79.8 million square feet in the first half of the year, according to Colliers. At mid-year 2019, 52.8 million square feet had transacted.
The pandemic drove these gains as e-commerce surged in the first half of the year. E-commerce accounted for 16.1% of retail sales in Q2 2020, which was an increase over the 11.8% in the previous quarter, according to the US Department of Commerce. That was a record for online shopping.
Overall, the industrial market posted 104.5 million square feet of occupancy gains at mid year 2020. The Big box segment claimed 79.8 million square feet, which was 76.3% of all net absorption in 2020.
As other commercial real sectors struggled in the first half of the year, vacancy, transaction volume and product under construction remained relatively flat across the country for bulk industrial space. According to Colliers, asking rents and net occupancy surged in the sector during the first half of 2020.
Cap rates were at a steady 5.6% midyear, while the industrial sector was the only CRE asset class to positive year-over-year growth at midyear, according to Real Capital Analytics. New development is also flourishing in the sector, with 170.7 million square feet under construction at the end of the second quarter of 2020.
Amazon, a huge beneficiary of the shift to online shopping, transacted more than 26.9 million square feet during the first half of 2020. That was more space than the company, which is the largest e-commerce occupier, transacted in all of 2018 or 2019, according to Colliers. In 2020, Amazon is expected to occupy 98 million square feet and over the next three years, it is expected to occupy an additional 161 million square feet.
E-commerce and manufacturing firms posted the highest percentage of occupier activity in the first half of the year, increasing their market share by 50% and 39%, respectively, according to Colliers.
With 56.1 million square feet occupied, third-party logistics firms claimed the highest percentage of bulk space during the first half of the year with 23.0%. General retail and wholesale firms (21.7%), manufacturing companies (19.5%) and e-commerce (14.1%) companies were the other large occupiers, according to Colliers.
With preferred locations, high-skilled labor, available land and an abundance of modern big-box warehouse/distribution product, the Inland Empire, Dallas-Fort Worth and Atlanta led the way in occupancy gains and leasing activity with nearly 19.4 million square feet of new leasing activity transacted. The Dallas-Fort Worth market had the highest level of occupancy gains and produced more than 14.5 million square feet of net absorption.