2024 North America Industrial Big-Box

Although industrial big-box leasing activity slowed in 2023, there were signs of increased demand by year-end. This trend has continued in 2024, with a rise in tenants in the market. The economic outlook is starting to clear, with the possibility of rate cuts, though their timing is now less certain. Continued strong retail sales and job growth have given many tenants the confidence to make new lease commitments. Additionally, increased supply has made for more favorable conditions for tenants in 2024. We project that food & beverage and online fulfillment companies will be key catalysts for demand, with more leasing activity than in 2023.

Occupiers are expected to prioritize supply chain resilience this year, given ongoing supply chain disruptions. This is likely to result in a demand shift from the need for safety stock to a stronger emphasis on storing inventory closer to the point of sale. Mid-size and big-box facilities should benefit, as users expand their hub-and-spoke fulfillment models.

Overall, we expect 2024 to be the third-highest year for industrial big-box leasing, surpassing 2023, but not 2022 or 2021 levels. The market’s abundant supply is likely to be short-lived due to the significant reduction in construction starts, leading to more landlord-friendly conditions in 2025. Macroeconomic and geopolitical trends will greatly influence industrial market activity. We will continue to closely monitor these trends and provide you with timely advice and insights.

Investor demand for industrial big-box properties slowed in 2023 due to higher interest rates and economic uncertainty. However, activity rebounded early this year as ‘second-mover’ institutions began to actively pursue sale offerings. This increased demand is evident from purchase bid sheets that are three times deeper than those in Q4 2023. Investor sentiment has significantly improved from last year, as industrial operating fundamentals remain solid and the credit market has stabilized. Investors are confident that the market is improving and are not trying to time it.

After expanding in 2023, cap rates for value-add and core+ offerings have compressed below debt neutrality in 2024. This is due to investors seeking below-replacement-cost buying opportunities. Even core offerings are experiencing cap rate compression, as demand for investment offerings strongly outpaces current supply. As a result, bid/ask spreads have disappeared as pricing for many deals is exceeding projections.