In late March, PA and NJ’s governors, as well as New York City’s mayor, shut down non-essential businesses and government agencies to slow the spread of COVID-19. Seemingly overnight, this led to the closure of all non-essential retail and forced office-based employees to work from home.

The resulting “new normal” will have lasting effects for all property types, but none greater than industrial real estate. Leasing activity within the Northeast corridor - New Jersey, the outer boroughs of New York City, the Philadelphia metro and Pennsylvania’s I-78/I-81 corridor – decreased during February and March but posted a significant uptick in activity during the month of April.

Source: CBRE Americas Research, 2020.

The industries that are driving leasing activity is led by retailers looking to quickly expand e-commerce operations, traditional e-commerce companies and third-party logistics (3PL) firms. COVID-19 and its associated quarantines are creating new online consumers, which will further increase e-commerce’s share of total retail sales. In Northern/Central NJ, e-commerce demand for warehouse space accounted for 43% of industrial leasing activity at 1.16 million sq. ft. while 3PLs claimed 19%. Along the Pennsylvania I-78/I-81 corridor, 3PLs comprised approximately 46% of leasing activity, while e-commerce accounted for 27%. This activity points toward stable industrial markets within the Northeast during the current crisis.

Looking forward, e-commerce will continue to be the biggest catalyst for both demand and innovation in industrial real estate over the next cycle. Increasing demand for goods bought online, especially food, will fuel the need for modern distribution facilities at a pace much higher than the previous cycle.