Spotlight Shifts from Mega to Smaller Warehouses

from CBRE

The growth of e-commerce has lifted the entire industrial and logistics real estate sector, with warehouses smaller than 120,000 square feet occupying the sweet spot. These “light industrial” properties outperformed other property types over the past five years, according to CBRE’s analysis, by size, of industrial buildings nationwide. Specifically, light industrial warehouses measuring 70,000 to 120,000 square feet registered the biggest decline in availability, down 3.9 percentage points, and the largest gain in average rents, 33.7 percent.

In metro Phoenix, light industrial properties outperformed industrial properties larger than 120,000 square feet during the same five-year period. The vacancy rate for properties 120,000 square feet and smaller decreased by half from 9.0 percent to 4.5 percent at the end of Q3 2019. Despite the decline in vacancy, only 16.5 percent of the industrial product under construction in Phoenix is below the 120,000-square-foot threshold. The vacancy rate for buildings above 120,000 square feet dropped 560 basis points (bps) to 8.3 percent, which is more than 200 bps above the marketwide vacancy rate.

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