flexiblefullpage -
billboard - default
interstitial1 - interstitial
Currently Reading

Robust demand strains industrial space supply

Industrial Facility

Robust demand strains industrial space supply

JLL’s latest report finds a shift toward much larger buildings nearer urban centers, which fetch higher rents.

By John Caulfield, Senior Editor | April 1, 2022
Larger facilities are helping to close the supply and demand gap in this sector. Image courtesy Dermody Properties
Larger facilities are helping to close the supply and demand gap in this sector. Image courtesy Dermody Properties

From 2010 through 2021, total U.S. industrial inventory grew by 18 percent. Over that same period, demand grew by 24 percent, driven by a surge in ecommerce that was exacerbated by the coronavirus pandemic.

“These events were defining moments that shed light on the fact that there is not enough supply to meet rapidly increasing demand in the industrial market,” states JLL in its research report “The Race for Industrial Space.”

This scarcity in industrial space has led to the sector’s lowest vacancy rate on record, from Los Angeles and Salt Lake City, to Columbus, Ohio, and New Jersey.

Demand is outpacing supply for industrial facilities. Chart: JLL
For at least a decade, demand for industrial space has been outpacing supply. Chart: JLL

Part of the problem is the sector’s aging warehouses: nearly three-quarters of industrial inventory is 20 years old older, and more than one-quarter is 50 years or older. Owners are scrambling to adapt older, smaller, and less functionally sophisticated facilities within urban centers at a time when demand for Class A space is at its peak, with almost 70 percent of newly modernized inventory pre-leased upon delivery.


The industrial sector is saddled with aging inventory
The warehouse sector is saddled with aging inventory. Chart: JLL

Space shortages have also led to accelerating rent growth. The average asking rents per square foot rose by 37 percent between 2016 and 2021.


JLL has identified nearly 100 proposed, under-construction, or existing adaptive reuse or replacement projects across a dozen markets. Distressed malls and vacant big-box stores are among the buildings getting industrial makeovers.

In denser urban areas where land is less available and more expensive, multistory warehouses are popular. One such example is 2505 Bruckner Boulevard, a former movie theater site on 20 acres in New York City that is being converted into a two-story, 1.1-million-sf warehouse with 28- to 32-ft clear heights. JLL states that occupiers of these multistory buildings “who value proximity to customers” are willing to pay top-of-market rents.

While smaller-warehouse developments still account for 60 percent of projects under construction, JLL estimates an 87 percent year-to-year increase in the number of 1-million-sf plus projects being built. “The high cost of land and the economies of scale from building larger structures make big-box facilities an easier fit,” says JLL.

The Sun Belt leads in new industrial development. Some 26 million sf have been delivered in Dallas-Fort Worth, 47 percent of which was pre-leased. More than two-thirds of the 20 million sf in industrial deliveries in Atlanta were pre-leased. Other Sun Belt markets like Houston, Memphis, and Phoenix are also seeing high levels of warehouse deliveries in their markets.

Yet, despite this construction activity, “demand and commodity pricing show no signs of slowing down in the near term,” says JLL. Last year, total costs to build a new warehouse rose 21 percent, according to JLL’s analysis of Bureau of Labor Statistics data. This dynamic “will enable general contractors to justify passing their increased costs to investors and end users.”

More larger warehouses being built
The construction trend in the industrial sector is leaning toward much larger warehouses. Chart: JLL

JLL concludes that rents for industrial space will increase more than 8 percent nationally this year, “and could be accelerated by year-end.” Vacancies will remain below the 4 percent threshold, as the imbalance of supply and demand continues through at least 2023. Projects are taking longer to build because of supply-chain delays, and land prices are peaking.

JLL predicts an “increased focus” on urban logistics sites in highly dense infill markets. JLL also foresees more adaptive reuses and conversions in urban centers.

As demand for larger buildings increases, older-generation buildings will be reimagined to accommodate end users with newer-aged features like electric vehicle parking, higher clear heights, increased truck radius maneuvering, and other reconfigurations to meet distribution needs.

Related Stories

Multifamily Housing | Jun 21, 2022

Two birds, one solution: Can we solve urban last-mile distribution and housing challenges at the same time?

When it comes to the development of both multifamily housing and last-mile distribution centers, particularly in metropolitan environments, each presents its own series of challenges and hurdles. One solution: single-use structures.

Industrial Facility | Jun 17, 2022

A new Innovation Center in Wyoming focuses on finding sustainable ways to use coal

The 10-acre site is part of the area’s R&D push.

Industrial Facility | May 19, 2022

A steady increase in new self-storage space is meeting growing need in large metros and their suburbs

Rent Café’s study projects a 9 percent bump in the nation’s existing inventory.

Adaptive Reuse | May 18, 2022

An auto plant in Detroit to get a retread as mixed-use housing

Fisher 21 Lofts could be the largest minority-led redevelopment in the city’s history.

Industrial Facility | Apr 30, 2022

CapRock Partners taps into industrial space demand

The investment firm is committed to building 15 million sf of warehouses.

Industrial Facility | Apr 14, 2022

JLL's take on the race for industrial space

In the previous decade, the inventory of industrial space couldn’t keep up with demand that was driven by the dual surges of the coronavirus and online shopping. Vacancies declined and rents rose. JLL has just published a research report on this sector called “The Race for Industrial Space.” Mehtab Randhawa, JLL’s Americas Head of Industrial Research, shares the highlights of a new report on the industrial sector's growth.

Industrial Facility | Apr 6, 2022

Development underway for Missouri’s largest logistics park

Hunt Midwest envisions 27 buildings will be completed over the next 10 years.

Sponsored | BD+C University Course | Jan 24, 2022

Design and construction of cannabis facilities

Industry experts offer advice on what it takes to design and build cannabis facilities.

Cladding and Facade Systems | Oct 26, 2021

14 projects recognized by DOE for high-performance building envelope design

The inaugural class of DOE’s Better Buildings Building Envelope Campaign includes a medical office building that uses hybrid vacuum-insulated glass and a net-zero concrete-and-timber community center.

Giants 400 | Oct 22, 2021

2021 Industrial Sector Giants: Top architecture, engineering, and construction firms in the U.S. industrial buildings sector

Ware Malcomb, Clayco, Jacobs, and Stantec top BD+C's rankings of the nation's largest industrial buildings sector architecture, engineering, and construction firms, as reported in the 2021 Giants 400 Report.

boombox1 - default
boombox2 -
native1 -

More In Category

halfpage1 -

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021


Magazine Subscription

Get our Newsletters

Each day, our editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.


Follow BD+C: