Big-Box Industrial Development Pushes Out from Major U.S. Metro Centers

Record demand for large warehouse and distribution facilities is forcing industrial developers to search farther afield from major U.S. metro centers for available land along key transportation routes.

While this trend is apparent in most U.S. markets, it is particularly prevalent in five of the biggest: Atlanta, Chicago, Dallas/Ft. Worth, Inland Empire and the New York/New Jersey/Pennsylvania region. Despite rising rents in these markets, occupier demand for space is at an all-time high. Understanding each market’s development history provides invaluable insights into its future trajectory.

Figure 1: Average Distance of Industrial Big Box Completions from Market Center

Figure 2: Number of Projects Developed 25 Miles+ from Market Center

Atlanta

The Atlanta industrial market currently has 29.5 million sq. ft. of big-box development under construction. Of this pipeline, 28 projects are less than 25 miles from the urban core and 48 are between 25 and 50 miles away, compared with 12 and 13 projects, respectively, in 2017.

Atlanta’s Northeast/I-85 Corridor, approximately 60 miles from the city center, is also seeing increased industrial development, particularly in Jackson County near the 104-acre Northeast Georgia Inland Port, scheduled to open in 2023.

The Northwest/I-575 submarket, approximately 40 miles from the city center, currently has 6 million sq. ft. of active development and is expected to see even more in coming years.

Figure 3: Atlanta Development 2017 – 2022+

Source: CBRE Research, Q1 2022.

Chicago

The market currently has 25.2 million sq. ft. of big-box industrial development underway. This is up from 20 million sq. ft. in 2017, the majority of which was located between 25 and 50 miles from downtown Chicago. The market has 10 projects totaling 4.4 million sq. ft. underway more than 50 miles from downtown, compared with only four such projects totaling 2 million sq. ft. in 2017. Major occupiers are attracted to these projects due to more affordable rents and plentiful space than are available closer in to the city center.

Industrial development is expected to expand this year into North Kane County, a market 50 miles northwest of downtown Chicago that boasts readily available land and convenient access to I-90.

Figure 4: Chicago Development 2017 – 2022+

Source: CBRE Research, Q1 2022.

Dallas/Ft. Worth

Big-box industrial development in the Greater Dallas/Ft. Worth area has more than doubled from 2017 to 53 million sq. ft. in 2022. There currently are 93 projects under development averaging 21 miles from the city center, compared with 45 projects averaging 16.5 miles away in 2017.

Nearly 45% of all new industrial leases signed in 2021 were in the South Dallas, North Ft. Worth and South Ft. Worth submarkets, along the periphery of the Dallas/Ft. Worth Metroplex. As a result, new development is occurring farther away, including the 287 Corridor 25 miles to the south and Forney/Terrell 35 miles to the east.

Figure 5: Dallas/Ft. Worth Development 2017 – 2022+

Source: CBRE Research, Q1 2022.

Inland Empire

The Inland Empire leads the nation with 60% year-over-year rent growth for big-box facilities due to its 1% vacancy rate and robust demand. The region has more than 25 million sq. ft. of big-box development currently underway. Of this total, 39 projects average 18 miles away from the Inland Empire core, compared with 34 projects averaging 13 miles away in 2017. Little development is occurring beyond 25 miles away.

Big-box development is spreading eastward through the San Gorgonio Pass and into the Coachella Valley along Interstate 10. Two proposed projects would bring 3.1 million sq. ft. of new logistics space to Banning and Beaumont, neighboring cities in the San Gorgonio Pass that straddle I-10. The Inland Empire North, formally known as the High Desert, will be one of the most active outer-core markets for development in coming years since land sites there are priced 50% to 75% less per sq. ft. than those in the Inland Empire core.

Figure 6: Inland Empire Development 2017 – 2022+

Source: CBRE Research, Q1 2022.

New York/New Jersey/Pennsylvania Region

Approximately 68.3 million sq. ft. of big-box development is underway in the New York/New Jersey/ Pennsylvania region, more than triple the amount in 2017. Land constraints in Central and Northern New Jersey have pushed most new development into the Pennsylvania I-78/81 Corridor, which accounts for nearly half of the development currently in progress in the region.

A total of 68 development projects averaging 100 miles away from Manhattan are currently underway, compared with 25 averaging 50 to 100 miles away in 2017. A new 1.2 million-sq-ft. speculative development more than 130 miles away is under construction in Luzerne County.

Figure 7: NY/NJ/PA Region Development 2017 – 2022+

Source: CBRE Research, Q1 2022.