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Which are the top 10 industries that lease industrial space?
Hello! Thank you for your inquiry regarding the top 10 industries that occupy and lease the most industrial space. In short, the top industries that occupying and leasing industrial space are: retail (e-commerce and traditional), food & beverage, 3PL, logistics/distribution, paper/packaging, pet food/supplies, consumer non-durable goods, consumer durable goods, biomed/biotech/pharma/healthcare and auto, auto parts & tires. However, we could not find actual square footage leased by these industries. Research reports that analyzed the industrial real estate market provided top industries occupying industrial space by their tenant size, which is correlated to space needed and leased by industry providers. We also included a brief overview of the industrial real estate market as well as some insights into the leading industry with the highest demand for industrial space. Below is an in-depth review of our findings and methodology.
METHODOLOGY
To fully answer your request, we searched reputable organizations who provides in-depth research reports regarding the industrial real estate market. These sites contained an abundance of information regarding top markets, top industries demanding industrial space, forecasts and trends. We focused on reports that provided a look into top industries leasing industrial space by square footage but, unfortunately, that information was not widely available. However, we did find that top industries were commonly identified but were reported in the terms of tenant size, not leased square footage. After finding a complete list of the top industries, we obtained data that provided an overview and slight insight to the industrial real estate market.
OVERVIEW - FORECAST AND TRENDS
70.1 million square feet of industrial space was leased in the second quarter of 2016 alone, with a total of 132.2 million square feet for both the first and second quarter. Furthermore, warehouse availability has seen a decline for 25 consecutive quarters. This has resulted in high rental increases by approximately 4.1%. Growth has also increased development of industrial space, with developers building approximately 99.9 million square feet of new space.
2017 shows to be a promising year for industrial real estate, as well. It is estimated that quarterly net absorption of square footage will be 64 million square feet. Even though experts have an optimistic look on the growth, it could be possible that the increasing demand will continue to raise inflation, interest and rental rates, which could result in a decrease in consumer and business spending. Business models have also predicted that 2018 will likely see a decrease in net absorption of square footage, however, this is unlikely to affect industrial space used as a final distribution center before delivery to consumers.
According to NAIOP, some trends that are affecting the real estate market are changes in ownership, foreign investments, retail expansion, fulfillment centers and managing risks within the supply chain. Over the past few years, industrial and distribution properties have seen ownership changing hands and becoming more institutionalized. This has led to properties belonging to fewer owners, ultimately decreasing local competition. Capital investment from foreign countries has also driven sales of industrial real estate. For example, Singapore has been actively acquiring industrial properties in the U.S, becoming the second-largest logistics property owner.
Additionally, retail sectors are expected to push leasing and industrial space sales, mainly in "big box" centers to meet ever-growing customer demand. As e-commerce continues to grow, retailers will be seeking to lease or purchase fulfillment centers that are located near their vast customer base, which may require multiple fulfillment locations. Supply chain disruptions remain a concern for distributors and managing those risk are essential for supply chain managers. Because these disruptions affect industrial developers and owners indirectly through their customers, developers have been monitoring these types of events.
TOP 10 INDUSTRIES LEASING INDUSTRIAL SPACE
Below is a list of the top 10 industries occupying and leasing industrial space. The list is in order from highest to lowest tenant size.
We were also able to identify which industrial markets have the highest leased square footage.
WHY RETAIL IS THE LEADING INDUSTRY LEASING INDUSTRIAL SPACE
Retail, especially in e-commerce, has been driving the demand for industrial space, as well as rental rates. This growth is a direct result of demand outgrowing supply, resulting in retailers aggressively searching for leasable warehouse and distribution space that can reach their large customer base. Rising rental rates are expected to continue throughout 2017. Although the imbalance of demand and supply remain a concern for retailers, it is expected that this will level out and eventually lead to a deceleration in the demand for industrial space.
CONCLUSION
To summarize, the top 10 industries leasing industrial space include: Retail (E-commerce and traditional), food & beverage, 3PL, logistics/distribution, paper/packaging, pet food/supplies, consumer non-durable goods, consumer durable goods, biomed/biotech/pharma/healthcare and auto, auto parts & tires. The industrial real estate market is continued to boom throughout 2017, with a forecasted deceleration starting in 2018. However, this decline is likely to not affect fulfillment and distribution centers.
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