The US industrial real estate market demonstrated remarkable resilience throughout 2020 and early 2021, maintaining robust growth despite global pandemic challenges. This exceptional performance stems from multiple factors, with e-commerce expansion emerging as the primary catalyst. Each consumer's online purchase contributes to soaring demand, record-high rents, and declining vacancy rates across industrial properties.
Market Overview: Sustained Growth Amid Tight Supply
First-quarter 2021 data from CBRE's "U.S. Industrial & Logistics Figures" report confirms the market shows "no signs of slowing," characterized by rising rents, substantial construction pipelines, low vacancies, and 44 consecutive quarters of positive net absorption.
Key Performance Indicators
- Net Absorption: Reached 99.3 million square feet in Q1 2021, marking the third-highest quarterly figure on record. This surge reflects freight companies rapidly leasing space to meet escalating warehousing and distribution needs.
- Rental Rates: Average asking rents climbed to $8.44 per square foot, representing 2.2% quarterly and 7.1% annual increases.
- Vacancy Rates: Edged up 30 basis points to 7.0% due to construction delays, remaining near historic lows.
- Construction Pipeline: A record 376 million square feet of industrial space was under development, with 47% pre-leased.
Market Dynamics: Challenges and Opportunities
Construction completions plummeted 32.4% quarter-over-quarter to 58.2 million square feet - the lowest since Q2 2019 - due to weather delays, rising material costs, and supply chain disruptions. Meanwhile, transaction volume surged 60% year-over-year to 224 million square feet, setting new records.
E-Commerce: The Primary Growth Driver
James Breeze, CBRE's Global Head of Industrial & Logistics Research, noted: "E-commerce has been the demand driver over the past decade, but 2020's dramatic acceleration prompted companies to secure capacity early and maintain inventory buffers against disruptions."
The pandemic accelerated three critical e-commerce impacts on industrial real estate:
- Warehousing Needs: Expanded storage requirements for faster order fulfillment
- Distribution Networks: Last-mile facilities near population centers
- Inventory Strategies: Safety stock holdings to prevent shortages
Sector Analysis: 3PL Leads, E-Commerce Follows
Third-party logistics providers (3PLs) accounted for 29.1% of Q1 leasing activity, followed by general retail/wholesale (26.7%) and pure-play e-commerce (17.4%). This distribution highlights how online retail growth stimulates demand across multiple industrial property segments.
Future Outlook
With pre-leased developments entering the market and tenant demand remaining elevated, industry experts anticipate continued growth. Breeze observed: "Annual rent growth averaged 6.8% over five years - an extraordinary pace that tenants accept to optimize their supply chains."
The market faces challenges including land scarcity, labor costs, and regulatory pressures, but benefits from sustained e-commerce expansion, supply chain modernization, urbanization trends, and technological advancements in warehouse operations.
Investment Considerations
Strategic opportunities exist in:
- E-commerce distribution hubs
- Transportation-adjacent logistics centers
- Emerging secondary markets
- Sustainable development projects
The US industrial property sector remains positioned for long-term growth, supported by fundamental shifts in consumption patterns and inventory management practices accelerated by the pandemic.