Watch for These Niche Industrial Markets
Other markets emerge in importance as companies reconsider reshoring and nearshoring manufacturing.
Industrial rents grew fastest among a host of familiar metros last month – but a crop of niche markets is also seeing demand tick up as companies reconsider reshoring and nearshoring manufacturing.
According to CommercialEdge, average in-place rents grew 7.4% year-over-year in the Inland Empire, 6.8% in Los Angeles and 6.5% in Orange County. But “cross-border trade activity in North America could lead to increased demand for industrial space in rail and truck port markets such as Detroit, San Diego and Southern Texas,” the firm notes in a July analysis of sector data.
And Motor City appears to be one to watch. This city is seeing increased demand as cross-border shipping picks up between the U.S. and Canada. Nearby Port Huron is also one of the nation’s busiest rail and truck entry points. The city has an industrial vacancy rate of 7.2%, and a new lease costs just 23 cents more than the market average.
As land scarcity continues to strain the sector, “consumer demand for quick delivery of online purchases is intensifying the need for well-located last-mile distribution facilities,” the report notes, adding that research from Prologis suggests that transportation accounts for roughly half of all supply chain costs, “underscoring the need for well-located facilities, especially when considering the recent run-up in diesel prices. Offshoring of manufacturing in recent decades led to industrial areas in many major cities being rezoned as residential and commercial districts (and) land scarcity is leading to new modes of operation from both occupiers and developers.”
Another city to watch: Indianapolis, which serves as a logistics hub thanks to its central location and proximity to FedEx’s second largest hub globally. The city has the fifth-largest industrial pipeline in the nation by square footage and the second largest by percentage of existing stock, and includes a 2.2 million square foot Walmart distribution center slated to deliver this year.
Nationally, there is 667.5 million square feet of new industrial stock under construction, with an additional 684.6 million square feet in planning.