Future Cities

2020 North America Industrial Big Box Review & Outlook


Skyline of the city of Indianapolis
Indianapolis’s proximity to population centers minimizes outbound shipping costs for distributors. The market also has a deep labor pool that matches the profile distributors demand. With robust speculative development, excellent infrastructure, highly competitive economic incentives packages, a favorable business tax environment and being in a right-to-work state, Indianapolis checks all the site selection boxes.
Jeremy WoodsSenior Vice President

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More than 2.6 million people live within a 50-mile radius of the urban core, with a 4.6% expected growth rate over five years—the highest of any Midwest market in this report. Robust population growth portends a sizeable labor pool for the foreseeable future. Indianapolis’s central location gives it access to more than 43 million people in a 250-mile radius, 6 million more than nearby Chicago.

Figure 1: Indianapolis Population Analysis

Source: CBRE Location Intelligence.

According to CBRE Labor Analytics, the local warehouse labor force of 62,488 is expected to grow by 17.3% over the next decade. The average wage for a non-supervisory employee is $13.83 per hour, 1.7% lower than the national average.

Figure 2: Indianapolis Warehouse & Storage Labor Fundamentals

Source: CBRE Labor Analytics.
*Median Wage (1 year experience); Non-Supervisory Warehouse Workers (forklift, warehouse workers).

Location Incentives

Over the past five years, there have been 652 economic incentives deals totaling more than $878 million at an average of $12,738 per new job in the Indianapolis metropolitan area, according to Wavteq.

According to CBRE’s Location Incentives Group, among the top incentive programs offered in metro Indianapolis is the Economic Development for a Growing Economy Program, which provides refundable discretionary tax credits for corporate income taxes for up to 10 years. These credits equal up to 100% of new income tax withholdings generated by a project’s job creation.

Another incentive program available in metro Indianapolis is the Hoosier Business Investment Tax Credit Program, which offers a non-refundable tax credit to companies that create new jobs and make capital improvements to a business facility. The tax credits are calculated as a percentage of the capital investment made to support the project.

Figure 3: Indianapolis Top Incentive Programs

Source: CBRE Location Incentives Group.
Note: The extent, if any, of state and local offerings depends on location and scope of the operation.

Logistics Driver

Greater Indianapolis offers a plethora of logistics advantages for industrial occupiers. The region is one of the best for trucking, with more national highway intersections than any other state. Under its “Major Moves” program, Indiana is investing $10 billion over 10 years to add 400 miles in new highways. Indianapolis is home to the second largest FedEx air hub in the world, helping Indianapolis International Airport consistently rank among the top five cargo airports in the nation. Indiana also ranks third for total railroad miles in the country.

Indianapolis’s strong market fundamentals and rent growth have resulted in more institutional investors looking to acquire bulk product in the market. Sales volume was down by nearly 32% year-over-year in 2020, largely due to COVID-19 restrictions. 2021 sales volume is expected to return to or exceed 2019 levels. Class A cap rates are currently between 4.8% and 5.0%, with moderate compression expected in 2021.
Ryan BainExecutive Vice President

Capital Markets

Figure 4: Cap Rate Comparison

Source: CBRE Research.

Supply & Demand

Another robust year of transaction volume has made Indianapolis a top-tier big-box market. Transaction volume totaling 18.2 million sq. ft. in 2020 was up by 55.6% year-over-year. 3PL providers accounted for 40.5% of total transaction volume. Developers are building product at a record clip, with completions nearly doubling year-over-year in 2020 to 12.1 million sq. ft. As a result, the vacancy rate increase by 2.6 percentage points to 6.9%. Another 3 million sq. ft. is currently under construction, 40% of which is preleased. The dramatic drop in new construction should lower the vacancy rate and increase asking rents in 2021.

Figure 5: 2020 Occupier Transaction Market Share

Source: CBRE Research.

Figure 6: Transaction Volume

Note: Includes new leases, renewals, and user sales transactions 200,000 sq. ft. and above.
Source: CBRE Research.

Figure 7: Big Box Year-Over-Year Comparison

Source: CBRE Research.

Figure 8: Under Construction & Percentage Preleased

Source: CBRE Research.

Figure 9: First Year Taking Rents (psf/yr)

Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research.

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2020 North America Industrial Big Box

This report provides an in-depth overview of supply-and-demand fundamentals, demographics, logistics drivers, labor and location incentives for the top 22 markets in North America.