2023 North America Industrial Big Box

While big-box leasing activity slowed at year-end 2022, prospective tenants in the market reached an all-time high and fundamental demand drivers remained in place. Food & beverage, home improvement, third-party logistics and online fulfillment should remain key demand catalysts, even if their leasing activity does not match the last two years’ robust pace.

Occupiers will place greater focus on inventory management and supply-chain resilience this year. This likely will result in demand being driven less by the need for safety stock and more by the need to store inventory closer to the point of sale. Mid-size and big-box facilities should be the beneficiaries, as users expand hub-and-spoke fulfillment models.

Overall, we expect 2023 to be the third-largest year for leasing, trailing 2022 by 10% to 12% and 2021’s record level by a little more. Limited supply will temper activity in some markets, and we expect marginally higher renewal activity in 2023.

Macroeconomic trends will greatly influence industrial market activity. We will continue to closely monitor these trends and provide you with timely advice and insights.

We expect industrial & logistics investment activity this year will be the opposite of 2022, which had record sales volume in H1, followed by a 16% decline in H2.

After reaching a low point in investor sentiment in Q3 2022, the market stabilized in Q4 as bid/ask spreads narrowed, fewer deals repriced or were dropped and some buyers came off the sidelines.

Demand for high-quality big-box distribution facilities has increased in recent months as investors seize opportunities to acquire fully functional properties, often for less than replacement cost.

We believe cap rates will begin to compress in H2 2023 as many investors who are under pressure to deploy capital see opportunity in industrial assets. An H2 rebound, of course, depends on continued positive operating fundamentals, the federal funds rate plateauing and greater clarity regarding the macroeconomic environment.

We will monitor these and other factors closely in coming months and continue to provide you with timely advice and insights.