ITRA Global News

Industrial Space Markets Remain Tight - Little Change Expected

September 30, 2020

Despite COVID-19 lockdowns and travel restrictions, consumer pursuit of industrial space continues at a brisk pace.  How can this be?  We explore the main reasons below.

E-commerce and last mile delivery strategies to get products into the hands of consumers quickly have resulted in continued demand for distribution space near large population centers for the past decade.  This demand has been the primary driver behind the construction of large, new facilities and it is expected to continue in the coming years.    

Ordering goods online has been a growing segment of the worldwide economy since the late 1990’s.  When you have an ongoing pandemic, online ordering explodes!  This pushes more products through distribution centers as far fewer people visit retail stores.  As long as consumer spending remains relatively strong, online ordering will continue.

The cost of construction has been a limiting factor in the development of some types of new industrial facilities.  Most of the new industrial buildings developed have been for distribution purposes.  These buildings have high clear heights, wide column spacing, and numerous loading docks.  However, few multi-tenant industrial buildings have been developed for smaller industrial users because of the high cost of construction and the higher rents needed to justify the development.  This also holds true for office-showroom types of properties that typically contain a higher percentage of finished interior space and more parking stalls.    

So where are we headed in 2021?  We have economic headwinds, so there will be some general slowing in the sector overall, but markets are expected to remain in the single digits from a vacancy rate perspective.  We expect positive distribution space absorption will continue along with new development to satisfy the demand for e-commerce space.  We also anticipate increased demand for office/showroom space from businesses currently leasing space in multi-tenant office buildings.  Office/showroom (or flex) properties typically have their own HVAC systems and exterior access, which is attractive to office space users during the pandemic.  Some companies located in urban area office buildings are also looking to relocate into the suburbs due to security concerns.  Finally, the small bay industrial user will continue to see relatively tight markets, but the vacancy rate is expected to rise a little due to the pandemic economic fallout. 

If your company needs industrial space, contact your ITRA Global representative. 

Back to blog