“Manufacturing jobs are growing in strong fashion, but wholesale trade jobs are down more than 2% year-over-year and transportation/utilities job growth has slowed in the past few months,” Matthew Schreck, Ten-X quantitative strategist, tells GlobeSt.com. “With a higher-than-average forecasted supply pipeline through 2021, San Antonio suffers disproportionately from our 2019/2020 modeled cyclical scenario, as vacancies would rise and rent growth slows. One key to note though is that many of the sell markets for industrial have better outlooks than the sell markets in the other CRE segments because industrial is benefitting across the board from strong overarching tailwinds.”

Los Angeles, Nashville, San Diego, Portland and Sacramento are the top markets in which investors should consider buying industrial assets. Notably, four out of the top five buy markets are in the western region, with Southern California in particular benefiting from trade flows with China and Trans-Pacific commerce. However, the report cautions that the current political environment casts some uncertainty over the region's recent trade benefits.

Nationally, Ten-X research found that robust absorption has helped drive industrial vacancies down to just 7.6%, the lowest levels since 2000. With both supply and demand expected to soften through 2018 as the economic cycle matures, vacancies should bottom out in the mid-7% range. Rent growth has held steady in the mid- to upper-2% range in recent years, boosting rents across the sector to a historic peak. E-commerce continues to drive growth and demand for warehouse and distribution space. The increase in cloud computing is also creating an unprecedented need for data centers.

While oil prices have rebounded in recent months, oil continues to hover around $50 a barrel, limiting the energy industry's contributions to growth in the industrial sector. This incremental rise has allowed for capacity utilization to trend upward during the course of the year. Ten-X says industrial production has also seen a spike to its highest levels since 2014, though the increase is not the primary driver of the sector's current success.

The report also noted trade flows have steadily improved during the course of the year, in part due to a resurgence in Asian intra-regional shipments and recovering import demand in North America. However, significant risks remain from protectionist policies, rising geopolitical tensions and a mounting toll from a series of natural disasters. While the Trump administration remains unsettled on a concrete tax plan, its decision not to pursue and pass a border adjustment tax is an encouraging sign for future trade growth, says Ten-X.