News release

Industrial property sales surge to $4B in transactions since COVID

JLL Capital Markets sees U.S. industrial sales reaching up to $85 billion by year-end

December 15, 2020

CHICAGO, December 15, 2020 – Investor demand for industrial property has grown, in part due to factors accelerated by the COVID-19 pandemic, and JLL Capital Markets has grown its transaction activity in parallel with 103 sale transactions totaling nearly $3.98 billion either under contract or letter of intent as of October 31. JLL is also actively sourcing $2.9 billion worth of debt placement transactions for 85 industrial acquisitions and refinancings.

Growth in e-commerce shopping began well before the start of the pandemic, but various levels of stay-at-home orders in the spring caused a sudden spike in e-commerce activity that resulted in an immediate need for additional industrial space for those users. E-commerce users are driving this increased industrial demand, something that will continue to grow as even more consumers adopt online shopping and retailers continue to look to solve the last mile equation. Earlier this year, JLL predicted that demand for industrial real estate could reach an additional 1 billion square feet by 2025 as e-commerce sales continue to grab market-share.

“We foresee industrial demand continuing far into 2021, which is causing investors to aggressively increase their industrial holdings,” said John Huguenard, Senior Managing Director, Industrial Platform Leader, JLL. “We keep seeing record pricing, especially with high-credit profile e-commerce tenants with 10-year-plus weighted-average lease term. Since industrial is seen as a safe investment, we’ve observed an increase of new capital and investment groups entering the space since the pandemic started.”

Through the third quarter of 2020, investment volumes accelerated significantly over Q2 to $55.4 billion, and still represent the second highest tally for volume by sector through three quarters. This will help industrial sales in the U.S. close out the year with an anticipated transaction volume between $75 and $85 billion.

With increased volume, comes increased pricing

Pricing is now stronger for all industrial product than pre-COVID levels, and cap rates in virtually every market are setting records for Class A and B opportunities. Real Capital Analytics (RCA) reports that industrial pricing is up 7.4 percent year-over-year and 1.9 percent from Q2 to Q3 2020. The 103 sales transactions JLL has under contract or letter of intent average a little more than 313,000 square feet and $41.5 million, resulting in an average of $132.53 per square foot. Additionally, 21 of the transactions that were placed under contract or letter of intent occurred between September 28 and October 30, totaling $1.2 billion.

These transactions include Class A and B properties, with distribution uses overwhelmingly the most popular. The trades are geographically diverse across all regions, with the majority located in dense, infill, last-mile markets, supporting the trend that industrial users desire to be close to their customer base to reduce delivery times. Most of the assets are in the western and southwestern regions.

Lenders compete for a piece of the industrial pie

Given how healthy industrial fundamentals are, lenders are often competing for business, which has helped borrowing rates reach historical lows.

“Industrial has always been a favored product for both investors and lenders,” said Jody Thornton, President, Capital Markets, Americas. “The low capital expenditure requirements of most industrial product make it a highly sought-after asset type for lenders, especially insurance companies and banks.”

Thornton explained that, “Certain industrial sub-types, like cold storage or lab/biotech properties, have higher capital expenditures associated with them, but an uptick in demand for those types due to the acceleration of e-commerce and COVID-19 has overshadowed that aspect.”

Industrial demand shows no sign of slowing into 2021

JLL expects pricing to continue to rise, as the disruption to the development pipeline by two to three months due to COVID will limit the number of new deliveries in the second half of 2021. This means tenants who want new space will have extremely limited options and might find themselves in a bidding war situation for higher rents to get space.

According to JLL Research’s United States 3Q Industrial Outlook, demand shown in industrial rents continues to set historic rates of $6.32 average per square foot nationally, which is a more than a 36 percent increase over the previous cycle record set in 2007. Rent collections are the strongest in the industrial sector compared to other property types, coming in at 99.4 percent in July, and many tenants are focused on expanding.

“E-commerce leasing is dominating the industrial market, with a total of 71.3 million square feet year to date,” said Peter Kroner, Investor Research, Industrial. “COVID has completely catalyzed tenant expansion, specifically in the latter half of the second quarter, and throughout the third quarter as retailers scrambled to bridge direct-to-consumer gaps in their supply chain.”

According to Kroner, “Demand for space will only increase the competition to acquire industrial product, which shows no signs of slowing in 2021, as new deliveries will slow down in the second half of next year.”

JLL Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm's in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether investment sales advisory, debt placement, equity placement or a recapitalization. The firm has more than 3,700 Capital Markets specialists worldwide with offices in nearly 50 countries.

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About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of over 92,000 as of September 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit