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Demand for big-box warehouse space is returning to pre-pandemic volumes after reaching “unprecedented” levels in 2021 and 2022, according to a new market report from Colliers (CIGI) that analyzes the interplay between industrial and retail properties.
Vacancy rates for big-box warehouse spaces are climbing throughout the country, per Colliers. This is mostly due to record new supply, which caused a 29 percent drop-off in demand for big-box industrial sites in the first half of this year.
That fact would normally be cause for industry concern, the Colliers report notes, but it could also help return big-box vacancy to healthier levels. The construction pipeline for such properties will also dip dramatically heading into the new year, further balancing supply and demand.
Colliers defines big-box warehouse properties as a market’s most modern, investment-grade product, with buildings of at least 200,000 square feet, ceilings 28 feet and higher, and precast construction. Big-box retail is defined as a store that occupies 50,000 or more square feet, offers a variety of products to customers, and typically focuses on large sales volumes.
Along with supply-chain reorganizations and third-party logistics requirements, e-commerce has catalyzed the need for both large distribution centers and smaller, last-mile facilities. Online sales are expected to grow to account for more than 20 percent of all retail sales by 2027, swelling by over 1 percent annually, per Colliers.
The last mile of the supply chain becomes particularly important during the holiday season, due to the need for more inventory on shelves and end-to-end visibility on shipments.
Colliers expects consumer demand to again test the limits of the industry this year, which is still reeling from pandemic-era supply chain disruptions. Overall holiday spending this year is predicted to grow by 3.1 percent.
“Retailers are reshaping their market position through data-driven innovation, adapting to evolving consumer demands, and rethinking their store formats, all while maintaining an eye on the shifting landscape of holiday spending and the rising prominence of omnichannel fulfillment,” said Anjee Solanki, Colliers’ national director of U.S. retail services.
Colliers also provided relatively good news for the retail market in America’s second-largest city last month. Overall retail leasing activity in Greater Los Angeles has improved lately, though specific conditions across Southern California are mixed.
Nick Trombola can be reached at NTrombola@commercialobserver.com.
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