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Supply Chain News: Despite Overall Economic Slowdown, Demand for Large Distribution Center Space Marches On


Report from Colliers Says Amazon Took Over 26.9 Million Square feet in 1H 2020

Oct. 6, 2020
SCDigest Editorial Staff

The US economy contracted by 31.4% in Q2, according to final estimate released by the Commerce Dept., but demand for warehouse space in the US continued its upward arc.

Supply Chain Digest Says...

There are 922 DCs from 500,000 to 749,000 square feet, with 63 of those vacant. Finally, there are 801 DCs at 750,000 square feet and above, just 45 of which are empty.

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According to a new report on the North American warehouse market through the first half of 2020 from real estate firm Colliers, net occupancy gains for warehouse space was up a very strong 51% over the 52.8 million square feet transacted at mid-year 2019.

The strong demand was driven by "Pandemic-induced growing reliance on ecommerce retailers for basic goods, fueled demand for industrial big-box product as supply chains continued to be right-sized, shifting away from “Lean” inventory strategies that proved sound in the past," Colliers says. It defines "big box" warehouses of over 200,000 square feet in size.

A total of 96.5 million square feet of new supply was added to the market in the first half, and an additional 170.7 million square feet of big-box space remains under construction.

As can also be seen in the chart below from the report, "net absorption" (the net of space leased versus abandoned) totaled 79.8 million square feet in 1H 2020, meaning the full year total is likely to exceed the 131 million square feet of net absorption seen in 2019.

96 million square feet of space was added through June, with another 170 million under construction currently. Despite all that new space, the overall North American warehouse vacancy rated dropped just a tic, to 8.4%.

However, ecommerce generally and Amazon specifically drove much of the activity.




Source: Collier's

(See More Below)




Amazon leased an about 26.9 million square feet in the first half of 2020. Colliers projects that Amazon will take over nearly 100 million square feet across the US in 2020 alone, the report said.

As SCDigest reported a few weeks ago, Amazon is said to have plans to open more than 1,000 small warehouses in suburbs to support same and next day deliveries. The company said recently it was opening 100 distribution sites just in September, including fulfillment centers, delivery stations (for local Amazon driver pick-up), sorting centers (to organize shipments by zip code range) and other types of facilities.

The report ads that in North America there are currently just under 4000 distribution centers of 200,000 to 499,000 square feet, with just 257 of them unoccupied.

Similarly, there are 922 DCs from 500,000 to 749,000 square feet, with 63 of those vacant. Finally, there are 801 DCs at 750,000 square feet and above, just 45 of which are empty.

In the over 750,000 square foot market, net absorption came to 34.3 million square feet in the first six months of the year, twice as much as was seen for all of 2019, Colliers said.

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