New Research from CBRE Finds Demand for Megawarehouses Jumped in 1H 2024

Perhaps reports of the market for US warehouse space being in decline after several hot years following the start of the pandemic were premature.

Supply Chain Digest Says... CBRE predicts that demand for mega distribution centers should hold steady in H2 2024, with a pickup expected in 2025, supported by lower interest rates and more economic certainty. What do you say? Click here to send us your comments Click here to see reader feedback

That according to new research from real estate CBRE, which finds demand remains srong, at least for very large distribution centers.

CBRE found that there were leases for 31 “megawarehouses” in the US in the first half of this year, a 35% increase from the 23 recorded in last year’s first half. Meanwhile, new supply in the 1 million-sq.-ft.-plus category contributed to first-year taking rents declining by 2.2% from 2023 levels, while lease rates for all sizes of warehouses increased by 7.7% in that timeframe.

The report looked at the top 100 leases for warehouse space in the first half of 2024. It found that the average size of leases in the largest 100 increased to 814,000 sq. ft. from 791,000 sq. ft. a year earlier.

The largest percentage of the 100 leases were signed by traditional retailers and wholesalers with 30, followed by third-party logistics providers (29), ecommerce operators (14) and food & beverage companies (13).

“The largest 100 industrial leases got even larger in the first half,” said John Morris, CBRE President of Americas Industrial & Logistics. “The uptick in leases of 1 million-sq.-ft. warehouses, in particular, indicates that the market is starting to absorb excess supply.”

The report notes that much of the new warehouse construction completed this year was started months or years ago, when market conditions were different.

At a market level, California’s Inland Empire once again accounted for the largest number of the top 100 leases in the first half, followed by Memphis and Dallas-/Fort Worth, as seen in the graphic below.

Source: CBRE

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CBRE predicts that demand for mega distribution centers should hold steady in H2 2024, with a pickup expected in 2025, supported by lower interest rates and more economic certainty. The firm says Increased demand, coupled with less new supply coming online could result in higher rentals in 2025.

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