The U.S. industrial market is showing no signs of slowing down, despite its biggest player pulling back on expansion plans. E-commerce giant Amazon, which owns and leases hundreds of millions of square feet across the country, recently scuttled plans for 10 million square feet of distribution centers after reportedly leasing too much space over the course of the pandemic. Meanwhile, other major retailers like Walmart and Target are ramping up their industrial footprints in response to major upticks in online sales.
Some of the biggest industrial markets in the country are experiencing record low vacancy rates, as the trend of buying online continues to be extremely popular, more than 2 years after COVID shutdowns forced many brick-and-mortar stores to close. Nationwide, the industrial vacancy rate hit its lowest point in nearly 30 years. In California’s Inland Empire, one of the largest industrial markets in the country, June’s vacancy rate was just 0.6 percent. And as vacancy falls, more product continues to be built, with 656.5 million square feet of space under construction as of last month.
Demand for warehouse space is expected to rise exponentially over the next three years. One recent study from JLL pegged the number of square feet needed to meet that demand at 1 billion. In the face of this new landscape, developers are getting creative in finding much-needed space. Former malls and big-box stores are getting new life as fulfillment centers, while multi-level industrial facilities, or vertical warehouses, are in the works in major urban areas across the U.S. where space is limited.