Where Industrial Vacancy Rates Are Below the National Average

Industrial vacancy rates remain tightest in port markets struggling to keep pace with increasing demand, with Los Angeles, Orange County and New Jersey all showing rates at or below 3.6% in August.

And just to the east of those coastal California markets, the booming Inland Empire posted the lowest rate of all major metros surveyed by Commercial Edge at a staggering 1.2%. The IE is looking to relieve that pressure, according to Commercial Edge, with an additional 22 million square feet under construction, the third largest volume nationally. 

Around 130 million square feet of new industrial space has come online in the first half of this year, with another 447 million under construction. Around 53 million square feet entered the pipeline this summer, for a total of 500 million square feet currently under development.  Dallas-Fort Worth leads in terms of new supply, with 34.1 million square feet under construction, followed by Phoenix and the Inland Empire.

Elsewhere, other landlocked hubs with extraordinarily low vacancy rates than the national average of 5.9% include Nashville and Indianapolis at 2.7% and Columbus at 2.5%.

Industrial pricing took a small dip in August but nonetheless remains on the upswing at an average national price of $106 per square foot. 

“The industrial market’s fundamentals continue to attract strong investor attention,” the Commercial Edge report notes. “In fact, August’s pricing trends were nearly double the ranges recorded a mere seven years ago.”

Sale prices were highest in port markets like Orange County ($302 psf), Los Angeles ($204 psf), the Bay Area ($202 psf) and Seattle ($198 psf).  Of the $36.6 billion in industrial sales recorded in the first eight months of the year, $6.6 billion was signed in August alone, according to CommercialEdge data.

Research last month from Real Capital Analytics showed that Los Angeles and the Inland Empire were the top US industrial markets, with LA netting $3.2 billion in activity for the first half of 2021, 13% higher than its previous record level at midyear.  The Inland Empire registered $2.527 billion in sales and posted six transactions of $100 million or higher, including Costco’s $345 million purchase of a distribution facility in the IE that was the highest price ever paid for an industrial asset in the region. The two SoCal markets were followed by Chicago ($2.3 billion); Houston ($1.93 billion); Atlanta ($1.89 billion); Dallas ($1.8 billion); Boston ($1.4 billion); Phoenix ($1.37 billion); North New Jersey ($1.34 billion); and Seattle ($1.29 billion).