In logistics real estate, smaller is getting bigger

“The growth in online shopping and the need for fast delivery times is driving demand for urban industrial space unlike ever before,” said Leslie Lanne, JLL’s executive managing director, urban logistics. “E-commerce will keep driving the need for vertical space, and as a result we’re going to see this new urban logistics asset class spark progressively more developer and investor interest.”

According to JLL research, nearly 3.5 million square feet of industrial space was under construction by quarter’s end in Queens, Brooklyn, the Bronx and Staten Island, which comprise New York City’s Outer Boroughs. In the first quarter of 2019, that total was 542,680 square feet, JLL said.

By contrast, quarterly leasing activity was very light in the larger categories of 500,000 square feet and higher. In the 1 million-square-foot range, known in the industry as “big box,” leasing transactions were virtually nil, JLL said. That shouldn’t be construed as a lack of interest, however. Big-box supply has been exhausted by the unceasing multiyear demand for large buildings to support massive e-fulfillment operations. 

In Chicago, home of the country’s largest industrial market with 1.4 billion square feet, no 600,000 square foot buildings are, at this time at least, available to be leased in 2022, said Jack Rosenberg, the Chicago-based national director of logistics and transportation of the industrial advisory group at real estate advisory Colliers International Inc. In Las Vegas, 500,000-square-foot buildings will not be available for lease until the fourth quarter of next year, Rosenberg said.

Nationally, more than 137.9 million square feet of total industrial product was leased last quarter, JLL said. That represented a high-water mark for the year, it said.