Small to mid-size industrial real estate dominating the leasing market

November 30, 2021 – The increase in online shopping has become a primary driver of demand for smaller logistics facilities, making the most popular size segment for leasing 10,000 square feet to 49,000 square feet in the third quarter. Nationally, more than 137.9 million square feet of total industrial product was leased in third quarter, a new high for 2021.

More than half of industrial leasing in the United States in the third quarter came from users looking for space below the 100,000-square-foot threshold. The surge in ecommerce, labor shortages and consumer expectations, in terms of speed and delivery of product, have added more pressure than ever to the supply chain and its operations. As a result, industries servicing the supply chain and ecommerce continue to experience an increase in demand.

In the third quarter, the logistics and distribution and third-party logistics (3PL) industries accounted for 28.3 percent of total leasing volume. As more and more companies continue to outsource their operations to meet consumer online demand, JLL expects these industries to flourish, especially within the 3PL sector.

With construction costs continuing to increase, investor demand for small bay warehouses is expected to continue increasing, which is anticipated to drive further cap rate compression in 2022. Select core markets are seeing class B product trade at a cap rate below 4 percent.

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