Phoenix tops the list of emerging industrial real estate markets to watch, followed by Nashville, Columbus, Salt Lake City and Savannah.
An analysis by Cushman & Wakefield evaluating key performance indicators like net absorption, new tenant demand, vacancy, rent growth, construction pipeline and deliveries showed that Phoenix—one of the fastest growing industrial markets in the country—is among the tops in the nation for absorption. More than 57 million square feet of leasing drove 51 msf of absorption from 2019 through 2021—a huge uptick from the fourth quarter of 2018, when demand registered 15.9% and the city was ranked 29th nationally.
“To keep up with the increased demand, developers completed nearly 40 msf of new industrial product in that timeframe with another 33.0 msf in the pipeline as of Q1 2022, ranking the city as one of the largest development markets in the US,” Cushman & Wakefield’s Jason Price note. “Its proximity to West Coast markets and ports makes Phoenix an attractive alternative for occupiers over markets like A. and the Inland Empire as rents are less expensive and space options are more abundant. Like the remainder of the nation, rents are on the rise, but remain significantly cheaper than in markets along the West Coast.”
Meanwhile, Columbus is ideally situated at the intersection of I-70 and I-71 and 70 miles from I-75. Rickenbacker International Airport, a former air force base, is now a major cargo-focused airport and the city has enjoyed rising in-migration and relative affordability. Intel also recently announced plans to build two semiconductor facilities on almost 1,000 acres outside of New Albany, an initiative that will bring an estimated 3,000 jobs to the area. From 2019 through 2021, the Columbus warehouse market added more than 26 msf of new supply, and the city is now the16th largest industrial market in the nation, with another 14 msf of product under development.
Further south is Nashville, which is intersected by three major interstates, making Music City a focal point for more than 12 million consumers within a two-and-a-half-hour drive.
“That geographical advantage bodes well for logistics and e-commerce users who need easy access to a large number of customers,” Price notes. “Additionally, some major corporate announcements and relocations to Nashville, such as Alliance Bernstein, Amazon and Oracle, have had a trickle-down effect on the industrial market as more workers have migrated to the area. That’s driven more residential development, which in turn has spurred demand for construction materials and supplies, along with more consumer products. Of course, these goods flow through logistics real estate, which has helped drive demand for warehouse space to new heights.”
Savannah’s growth as an industrial market has been driven largely by increasing trade volumes at the Port of Savannah, making the city’s GDP tick up by 46% over the last decade (as opposed to 19% nationally). The region’s unemployment rate currently stands at 2.4%, well below the national rate of 3.6%, and its labor force is growing, with population rising by 7.7% since 2016.
“As both the cumulative impacts of rapidly rising trade flows met limited supply, vacancy was already compressed prior to COVID-19 and the emergence of global supply chain issues,” Price notes. “The market remains extremely stretched. Future expansions at the Georgia ports will help ease delays as they open in the coming years.”
Price also predicts that the ongoing expansion of the Port of Savannah will help push fundamentals, allowing the industrial market to post further growth “well into the future.”
And finally, Cushman ranks Salt Lake City within its list of ones to watch: “A growing population and surging economy underpin Salt Lake City’s position in our markets to watch rankings,” Price says, noting that the metro area is home to roughly 1.2 million people, has seen an annual population growth of approximately 1.0% since 2019, outpacing the national average. Real GDP grew around 8.5% in 2021 and is expected to increase by another 4.1% in 2022.
“Looking ahead, from 2023 to 2025, the economy is expected to climb at an annual rate of 2.0%, led by manufacturing and real estate,” Price says. “The region also offers similar locational benefits as Phoenix, given its proximity to the West Coast markets (all of which are high rent markets). Salt Lake City offers additional accessibility to the Midwest as well.”