With consumers turning in larger numbers to home delivery of groceries, the food and beverage (F&B) sector has begun to take a greater portion of big box industrial leases. In fact, this activity is eating into the dominance that e-commerce has held in this space in recent history.
A new report from CBRE looked at the 100 largest industrial and logistics leases by square footage across the country in 2019. While e-commerce and logistics companies still accounted for the majority of big box leased space at 52 percent, the 4.1 million square feet that F&B firms took last year marked a 44 percent increase in market share.
This surge in F&B activity came from companies improving their grocery supply chain for supermarkets and home delivery. In fact, these companies accounted for 13 of the top industrial leases that CBRE tracked, for a cumulative 13 million square feet. That’s an increase from the nine leases and 8.8 million square feet that F&B took over in 2018.
“This report, which our team completes each year, often provides us a rough outline of important trends within the industrial and distribution sector—and the growth of grocery delivery is a clear factor this year,” said John Morris, executive managing director leading CBRE’s Americas industrial and logistics business. “E-commerce and logistics companies are the needle movers, but food and beverage quickly has established itself as a major player in industrial real estate leasing.”
While e-commerce fulfillment and logistics companies—including third-party logistics (3PL) providers—accounted for 52 percent of the square footage that CBRE tracked, that 2019 figure is down from the 61 percent that the sector took in 2018. That said, of the 100 leases, 34 were to e-commerce firms and 20 were to and logistics/3PL users, suggesting that there is still plenty of force behind their supremacy in the industrial real estate arena. These leases added up to 45 million square feet in 2019, in sizes ranging from 598,000 to 2.5 million square feet.
Chicago was a bit of an outlier for this growing trend. The Chicago market cracked the top ten for large transactions, with five deals totaling 4.2 million square feet making the list. The top performers in Chicago were transportation and logistics, manufacturing and retail, not F&B.
“E-commerce firms and traditional retailers remain active in the Chicago distribution market,” said Traci Buckingham Payette, executive vice president with CBRE. “As consumer habits continue to change, we are seeing more firms look for infill locations for their distribution network, even for larger warehouses.”
Chicago was far behind the 21 leases and 17.5 million square feet that California’s Inland Empire recorded in 2019 on CBRE’s 100 largest leases report. In fact, it wasn’t even tops in the Midwest as Memphis had nine deals totaling 6.9 million square feet and there was 4.4 million square feet across six transaction in the Indianapolis market.
“Large warehouse leases tend to cluster in major distribution markets, most of which are near busy ports, large population centers and robust transportation networks,” said James Breeze, CBRE global head of industrial and logistics research. “These rankings don’t fluctuate much from year to year for that reason. However, we do see smaller hubs like Memphis, Indianapolis and Columbus gaining momentum.”
E-commerce users will likely continue to be the largest segment of the big box industrial sector. However, as F&B continues to eat away at that market share, there will be greater demand in 2020 and beyond for both dry and cold-storage warehousing.