In the year through June 30, the demand for industrial real estate hit record high numbers, and with the pandemic accelerating demand for home deliveries, logistics and parcel delivery has taken the No. 1 spot in almost every region across the country.
In the newly released annual “Industrial Tenant Demand Study,” that sector now makes up nearly 20 percent of all industrial demand as a broader range of retailers enters the home delivery game. In the study, JLL Industrial tracked 1,800 individual future tenant requirements needing more than 600 million square feet of space and showed that future demand volume was up 22 percent this year compared to the same period in 2020 and is more widespread across all industries than ever before.
“Logistics and parcel delivery is the most active industry across nearly all building size categories,” Craig Meyer, JLL president of industrial, said. “This tells us that all ranges of companies need distribution services at all types of locations–urban, suburban or ex-urban. Traditional retailers are most active in the biggest size range of 1 million square feet and up, with a portion of that being e-commerce related.”
The top two industries–logistics and parcel delivery (L&PD) and e-commerce–driving demand in logistics are inexorably linked. L&PD reach is more widespread this year, with a growing focus on secondary and tertiary markets, the study noted. Expect even more L&PD leases to be executed in 2021 and 2022 when looking at this year’s demand, said JLL, a professional services firm that specializes in real estate and investment management.
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In e-commerce, the tenant base is diversifying, with new entrants to the sector rising 21 percent this year. With projections for e-commerce to make up 40 percent of all retail sales in the next five to 10 years, JLL Industrial expects demand for all related industries to continue to gain share.
Next in the Top Five list is traditional retailers. JLL said that “as consumers spent 2020 fixing up their homes, now they are filling them up,” with considerable pent-up demand giving value retailers a lift. Nearly 17 percent of traditional retailers have an e-commerce need, the study noted. Food and beverage, and construction, machinery and materials rounded out the list.
JLL reported that while the pandemic slowed new-to-market transactions in 2020, new requirements this year increased by 27 percent as tenants readjust to meet consumer demand.
There were also strong requirements for manufacturing space, rising 93 percent year-over-year through the first half of 2021.
“The driving factor in this uptick in demand is attributed to the reshoring of U.S. manufacturing and the establishment of a U.S. sourcing presence,” Mehtab Randhawa, JLL senior director of research, said. “Companies are realizing that long supply chains are subject to disruptions and higher costs, thus for certain products and industries reshoring makes economic sense, while mitigating risk.”
The repatriation of certain goods, such as PPE, defense and pharmaceuticals, offers many benefits, the report said, including self-reliance, an economic multiplier effect seen in job creation and increased sustainability achieved through closer sourcing and minimizing transportation.
“Looking forward, we expect the U.S. Industrial tenant demand to keep on the upward trend it has been seeing over the last decade, with no slowdown in sight,” Gillam Campbell, JLL manager of industrial research, said. “With previous years’ demand evolving into real leases, we know that current tenant sentiment remains strong.”
JLL had annual revenue of $16.6 billion in 2020, with operations in more than 80 countries. JLL is the brand name and a registered trademark of Jones Lang LaSalle Incorporated.