E-Commerce Drives Industrial Real Estate Expansion in Last 10 Years
Over the past decade, demand for industrial space has risen significantly in the U.S., driven mainly by the continued expansion of the e-commerce industry, which has proven to be an increasingly important sector in the global economy.
As it typically requires sizable regional distribution centers as part of operations, e-commerce has had a noticeable influence on the industrial real estate market in the country’s largest cities. But to what extent?
Using delivery and sales volume information from CRE data and listing platform CommercialEdge, sister company CommercialSearch released a report highlighting how the industrial landscape has changed between 2012 and 2021 in 30 major U.S. real estate markets. Here’s a breakdown at the regional level:
In the Southwest, all four markets analyzed experienced significant increases in industrial space. A major transportation hub, Dallas ranked highest for industrial real estate added in the last 10 years among all cities included in the study (a total of 208 million square feet), and it also showed the most significant jump in the last half of the decade.
Houston boasted the fourth-most industrial space delivered (almost 120 million square feet between 2012 and 2021) and came in second in the Southwest. What’s more, the city had the largest industrial completion of the decade (a whopping 4.1 million square foot property).
Moving more to the west, Phoenix recorded a boost in industrial construction in 2020, leading to 73 million square feet overall, while Denver saw its new industrial space grow more than five times from 2012 to 2021.
West Coast Region
Out on the West Coast, California’s Inland Empire had the second-most industrial space added in the past decade among all the markets studied (180 million square feet). However, it saw a major dip last year (only 11.1 million square feet, the lowest since 2012) due primarily to the area’s lack of available developable land. Even so, sales volumes spiked, increasing from $2.26 billion in 2020 to $5 billion in 2021, and the Inland Empire also featured the ninth largest industrial completion on the list, at over 2.6 million square feet.
Aside from Inland Empire, California’s Central Valley added the most space in the last decade among Western markets (53.1 million square feet), with a peak in 2018 of 12.4 million square feet. However, Seattle and Los Angeles surpassed it last year. Central Valley also featured the eighth largest industrial property (over 2.6 million square feet).
Los Angeles doubled sales volumes between 2012 and 2020, going from $1.85 billion to $3.62 billion, and then had a record-breaking $7.43 billion in industrial real estate sales in 2021.
Out of the Midwest markets analyzed, Chicago added the most industrial space every year except one over the past decade. The city also had the highest yearly sales volumes in the region from 2012 to 2021, other than Columbus’ peak in 2015 of $3.57 billion. Chicago then surpassed that in 2021 with $5.1 billion. As well, Chicago had two of the largest industrial completions in the past decade among the markets analyzed, both accounting for over 7.6 million square feet.
Indianapolis also added significant industrial space in multiple years, including the 8.3 million square feet in 2020 and the 11 million square feet in 2021, which put the city ahead of other Midwestern markets except for Chicago.
Other regional markets to record notable growth in 2021 were Columbus (+10.2 million square feet), Detroit (+7.8 million) and Kansas City (+7.6 million). What’s more, Detroit and Cleveland made the list with the largest industrial properties over the past 10 years, with completions of 3.7 million square feet (fifth spot) and 2.7 million square feet (seventh spot), respectively.
Several markets in the Northeast stood out in terms of industrial construction growth over the past 10 years. New Jersey topped the list for most of the decade, adding 56.8 million square feet between 2012 and 2021, though the city saw some decline after 2017. Industrial sales volumes in New Jersey were the highest in the region each year, other than in 2020 when Boston surpassed it with $2.2 billion.
In 2021, Bridgeport-New Haven saw a peak of 3.75 million square feet of industrial space, mostly thanks to a completed Amazon fulfillment center.
Baltimore and Washington, D.C. had 2.5 million and 2.3 million square feet added in 2021, much more than in 2012. D.C. saw a jump in industrial property sales in 2021 as well, surpassing the $1 billion mark for the first time.
Philadelphia also recorded growth in sales volume, particularly in 2021, with $2 billion. In addition, the city had the third-largest industrial completion of the markets analyzed over the past 10 years, accounting for more than 3.8 million square feet.
Atlanta has stood out when it comes to industrial development in the Southeast region in the last 10 years, adding an impressive 86.6 million square feet in total. Notably, the city recorded an all-time high in 2016 with 15.3 million square feet of added space, although new development began to slow here after that. The city has also shown continued growth in industrial sales volumes, reaching a whopping $3.2 billion last year. And to top it all off, Atlanta made the list of the largest industrial spaces completed over the past decade, ranking tenth with a property of almost 2.6 million square feet.
In 2021, Memphis took the top spot for industrial construction in the Southeast region with 9.4 million square feet delivered, a staggering five times more than the 1.8 million added here in 2012.
Charlotte also delivered a large amount of industrial real estate, with 4.5 million square feet incorporated in 2014 (the most industrial space in a year in the entire Southeast region) and a peak of 7.27 million square feet in 2018. The city, however, has seen some decline since then.
After seeing a dip in sales in 2020, the Tampa market rebounded with $1.88 billion in sales in 2021, while Nashville ranked sixth on the list with the largest industrial completions over the past decade, with a 3.6 million square feet property.
Interested in the office or shared spaces market in the areas mentioned in this study? Check out the links below: