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Food, Beverage Sector Gained Ground In 2019 US Warehouse Leasing, CBRE Says

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Food, Beverage Sector Gained Ground In 2019 US Warehouse Leasing, CBRE Says

The food and beverage industry expanded its share of the nation's 100 largest industrial and logistics leases in 2019 as increased demand for grocery delivery led to more investment in warehouses and distribution centers, according to a report issued Thursday by CBRE Group Inc. (NYSE: CBRE), a real estate services firm.

Food and beverage companies claimed 13 of the top 100 leases, totaling 13 million square feet, according to CBRE data. The sector captured eight of the top 100 leases in 2018 for 8.8 million square feet, CBRE said. The 2019 leases were for dry and cold storage facilities, though CBRE said it did not have a breakdown for each.

The growth in food and beverage footprint mirrors the growth of e-grocery transactions, albeit off a small base relative to all food retail sales in the U.S. In 2018, retail and food service sales in the U.S. totaled more than $6 trillion, according to research firm Statista. Online grocery sales totaled $28.68 billion in 2018, with sales expected to more than double by 2023, Statista predicted.

 Most think e-grocery sale volumes have just scratched the surface, and could easily hit double digits as a percentage of total food sales during the decade. If so, this opens up an entirely new channel for logistics warehouse demand, which eased off last year after a torrid seven-year run.

John Morris, CBRE's executive managing director in charge of the company's industrial and logistics business, said food and beverage "quickly has established itself as a major player in industrial real estate," which in CBRE's world includes manufacturing and logistics. Last year's numbers project "continued growth for both dry and cold-storage warehousing this year," Morris said.

E-commerce and third-party logistics companies remained at the forefront of warehouse leasing in 2019. CBRE said. Combined, they accounted for 54 leases with 45 million square feet of space, by far the highest in both categories. The next-closest category was wholesalers at 18 leases for 15.2 million square feet.

Still, e-commerce and logistics accounted for 52% of the total square footage in the largest 100 industrial leases last year, down from 61% in 2018, CBRE found. This could reflect a slowing in big-box demand through most of 2019. Prologis Inc. (NYSE: PLD), the world's largest logistics warehouse developer and manager, said U.S. big box activity eased up during most of 2019 before accelerating toward year's end.

California's Inland Empire east of greater Los Angeles dominated the geographic ratings in 2019 with 21 leases totaling 17.5 million square feet, CBRE said. That was more than double the second-largest market, Pennsylvania's Interstate 78 and 81 corridor with eight leases totaling 7.5 million square feet. Memphis leapt into the top five in 2019 with nine massive leases at 6.9 million square feet.

Image by Pashminu Mansukhani from Pixabay

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