Big Box Industrial Space Available Near Major US Ports Hits Record High

For most of the past decade, it has been challenging to find large blocks of industrial space available for lease near the largest U.S. seaports. In some markets, such as Los Angeles and Northern New Jersey, it was extremely difficult to secure any major spaces in the mid-pandemic boom in imports from 2021 through early 2022.

However, both the doubling of average industrial rents in many port-adjacent locations and the unprecedented wave of distribution center development have upended these tight market dynamics. In the current market, large tenants seeking industrial space near the busiest U.S. seaports have more options than at any point in at least 20 years.

According to the Census Bureau, the top five U.S. seaports by the combined weight of imports and exports processed in 2023 were the Port of Los Angeles, the Port of Newark, the Port of Houston, the Port of Savannah, and the Port of Virginia in Norfolk.

Since the end of 2020, the combined stock of existing industrial properties within a 30-minute rush hour drive of these ports has increased by 9.5% or 72 million square feet, roughly the size of 1,250 American football fields. Meanwhile, another 20 million square feet of industrial space remain under construction in these locations.

With developers focused on large projects that are designed to appeal to high-credit industrial tenants and garner interest from institutional real estate investors, the majority of this recently built space is comprised of projects that are 100,000 square feet or larger. The bulk of this space had also finished construction since the beginning of 2023 when industrial tenant expansions began to slow nationwide.

As a result, the square footage available for lease in industrial properties 100,000 square feet or larger within a 30-minute drive of the five busiest U.S. seaports reached a record late last year and has since risen even further, to almost 59 million square feet.

Even in the area within a 30-minute drive of the Port of Los Angeles, where the density of existing properties has kept new warehouse construction limited, the total square footage of industrial space available for lease in properties 100,000 square feet or larger is close to 8 million square feet, the highest level CoStar has ever recorded. Prolonged negotiations over a new long-term labor contract for the union that represents dockworkers on the West Coast, combined with industrial rents that sky-rocketed in mid-pandemic, have caused local industrial tenants around the port to shed space in 2023 and early 2024.

Among the five busiest U.S. seaports, only one — the Port of Virginia — has an availability rate in the single digits for nearby big-box industrial properties and below its 15-year average. Numerous marshlands and wildlife reserves that surround Norfolk, where the Port of Virginia is located, have kept nearby industrial construction very limited. Lower industrial rents than those found in major West Coast and Northeastern U.S. port cities have also kept Norfolk’s tenants from shedding existing space in the same numbers as recently seen in Los Angeles and Northern New Jersey.

Most U.S. industrial markets have a significant divergence in availability between big-box industrial spaces and smaller industrial spaces. The latter is in very short supply as few developers have built projects catering to tenants occupying warehouse spaces smaller than 50,000 square feet in recent years.

Industrial areas surrounding the busiest U.S. seaports are no exception. In stark contrast to record high availability among industrial properties 100,000 square feet or larger, space available for lease in properties smaller than 50,000 square feet and within a 30-minute drive of the five busiest U.S. seaports is still near the lowest levels CoStar had ever recorded before the pandemic.

Availability rates for industrial properties smaller than 50,000 square feet surrounding the Ports of Newark, Houston, and Virginia are all well below their 15-year averages. Meanwhile, availability rates for similar properties near the Ports of Los Angeles and Savannah are essentially commensurate with long-term norms.