The dynamics of the warehouse and logistics industry are shifting.

For years, the insatiable demand of e-commerce retailers (and the third-party logistics operators that served them) drove a furious pace of construction that still couldn't keep pace. But in 2019, new supply outpaced demand in North America for the first time since before the Great Recession, according to Cushman & Wakefield's annual industrial forecast report.

E-commerce remains the biggest demand source for industrial real estate, but grocery stores are beginning to catch up. In a study of the 100 biggest industrial leases signed each year, CBRE found that food and beverage uses gained 4.1M SF of market share from 2018 to 2019, a 44% increase.

Seemingly every major grocery chain is expanding its distribution network, but not every company is going about it the same way. While Kroger has been favoring large, heavily automated distribution hubs, competitors like Albertsons, Meijer, Ahold Delhaize and even Walmart have been moving toward facilities as small as 10K SF to service individual stores or neighborhoods.

Even with the food and beverage sector's growth, overall demand for warehouse space totaled 262M SF in 2019, compared with 336M SF of new supply, Cushman & Wakefield reports. That dynamic is expected to continue through at least 2021, with an estimated 573M SF of new supply outpacing net absorption by 113M SF over that time period. C&W said it sees no cause for alarm in that discrepancy, estimating that vacancy overall should hold steady at around 5%.

Much of the vacancy that is expected to linger comes from outdated space that can't meet the needs of rapidly modernizing logistics networks, C&W reports. The firm's researchers expect net asking rents to rise by 6.8% from where they were at the end of 2019 to the end of 2021.