Leases  ·  Analysis

Warehouse Demand Slows While Green Energy Firms Look for More Space

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Big e-commerce and distribution tenants are looking for less warehouse space across the country than they were a year ago, even as demand has grown for space to make batteries, electric vehicles, wind and solar components, and medical devices, according to a new JLL report

Tenants were searching for about 807 million square feet of industrial space this year, down by about 8 percent from 2022’s total of 873 million, the report found. 

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While logistics and distribution companies still need more space than any other kind of industrial user, demand for warehouse space declined 12 percent year-over-year to 694 million square feet. Meanwhile, manufacturers of clean energy equipment, electric vehicles and batteries are in the market for 100 million square feet this year, up from the 65 million square feet they wanted in 2022. 

Manufacturers and shippers looking for space in the Southeast account for about a third of the overall demand for industrial space nationwide, JLL found. The swath of states running from Kentucky and North Carolina to Louisiana and Florida account for 230 million square feet of tenant demand, partially thanks to car and battery manufacturers. 

In terms of specific cities, Atlanta is seeing a 17 percent spike in industrial demand on a per-square-footage basis, largely driven by electric vehicle manufacturers and energy companies. Corporations such as Rivian and Hyundai Motor Group have already chosen to locate their electric vehicle factories in and around Atlanta, accounting for 2.5 million square feet of manufacturing space in the coming year, according to the report. 

Columbus and Houston saw similar trends, with demand from solar energy outfits, electric car makers, data centers and microchip factories driving the need for more manufacturing space.

Southern California’s Inland Empire remains the largest industrial market in the country for logistics and e-commerce companies, which accounted for 42 percent of demand in the region over the past two years. However, as a result of the pullback from logistics companies, leasing volume in that area was down 13 percent for the first three quarters of this year compared to 2022, the report found.

Rebecca Baird-Remba can be reached at rbairdremba@commercialobserver.com.