Future Cities

2020 North America Industrial Big Box Review & Outlook


View of the Memphis city skyline
Memphis is coming off a record-breaking year in 2020. With the nation’s busiest cargo airport, five Class I railroads and within a two-day truck drive to 70% of the U.S. population, investors and users alike understand why Memphis is considered ‘America’s Distribution Center.’ With a continuing influx of new capital, organic expansion of existing tenants and the growth of e-commerce, the market shows no signs of slowing down.
Patrick WaltonSenior Vice President

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Memphis’s strength as a distribution market comes from its plethora of logistics advantages rather than its large close-in population. Just under 1.5 million people live within 50 miles of the market core, with an expected growth rate of 1.9% over the next five years. Within 250 miles, occupiers can reach 17.5 million people or 6.9 million households.

Figure 1: Memphis Population Analysis

Source: CBRE Location Intelligence.

According to CBRE Labor Analytics, the local warehouse labor force of just over 57,000 is expected to grow by 14% over the next decade. The average wage for non-supervisory employees is $13.38 per hour, 4.9% lower than the U.S. average.

Figure 2: Memphis 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 172 economic incentives deals totaling nearly $403 million at an average of $20,175 per new job in the Memphis metropolitan area, according to Wavteq.

According to CBRE’s Location Incentives Group, among the top incentive programs is the FastTrack discretionary grant program, which helps offset the costs companies incur in job training, infrastructure development and other project-related expenditures. To qualify, businesses must make a capital investment and create net new full-time jobs.

Figure 3: Memphis 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

Memphis is one of the most logistics friendly markets in North America. The region has an integrated transportation system of highways, rail mainlines, river ports and the second busiest cargo airport in the world. More than 27,000 companies have operations in Memphis, including more than 400 trucking companies.

Memphis is one of only four U.S. cities served by five Class I railroads. Single-system shipment is available to all 48 contiguous states, Alaska, Canada and Mexico. Trucks leaving Memphis can reach 35% of the U.S. population overnight and 68% in two days. I-40 runs coast-to-coast, I-55 intersects Memphis and allows direct access from Chicago to Louisiana, and I-69 connects Canada to Mexico.

The Port of Memphis I is 400 river miles from St. Louis and 600 from New Orleans, where cargo can be transferred to ocean liners. The No. 1 logistics advantage in the region is Memphis International Airport. Home to the largest FedEx hub in the world, Memphis International is the second most active air hub in the world and by far the top in North America, handling 4.3 million tons of cargo in 2019.

Robust fundamentals led to record-low cap rates in the upper 4% to very low 5% range last year. Sales volume increased by 15% year-over-year. Second-generation buildings with below-market rents but significant upside potential are very attractive to investors.
Frank FallonVice Chairman

Capital Markets

Figure 4: Cap Rate Comparison

Source: CBRE Research.

Supply & Demand

Transaction volume totaled 14.9 million sq. ft. last year, the eighth highest in North America but slightly below 2019’s total. Annual absorption tripled to 10.2 million sq. ft. Despite robust demand and a vacancy rate of 6.0%, Memphis remains one of the most affordable markets in North America with an average taking rent of $3.44 per sq. ft.

Memphis’s central location and air cargo capabilities make it a magnet for general retailers, wholesalers and 3PLs. Combined, they accounted for two-thirds of total transactions in 2020. Construction completions totaled 10.9 million sq. ft. last year. Another 12.2 million sq. ft. is currently under construction, 29.5% of it preleased.

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.