Industrial Rent Growth Shows No Sign of Slowing
Meanwhile the national vacancy rate has decreased 10 basis points.
As demand for industrial space continues to outpace supply, rent growth is accelerating.
National in-place rents for industrial space averaged $7.12 per square foot in February, up 6.9% year-over-year and two cents higher than January, according to CRE research firm Yardi Matrix. Growth of in-place rents is highest in markets adjacent to shipping ports.
The national vacancy rate was 3.9% in February, a decrease of 10 basis points over the previous month, found Yardi Matrix’s March 2023 National Industrial Report. More than a billion square feet of new stock has been delivered over the last 10 quarters, but vacancy rates remain historically low. Most markets have so far been able to absorb record levels of new supply.
Port markets and inland logistics hubs have the lowest levels of available stock to lease, according to the report. The lowest vacancy rates in the country were in Columbus (1.1%), Southern California’s Inland Empire (1.7%), Phoenix (2.3%) and Indianapolis (2.5%).
New leases signed in the last 12 months averaged $9.09 per square foot, $1.97 more than the average for all leases. The largest spreads between the average rate for all leases and the rate of a lease signed in the last 12 months were in port markets, both on the East and West coasts.
While demand for industrial space shows little sign of letting up, the supply side of the equation is being addressed. Nationally, 667.5 million square feet of new industrial supply are under construction, and 73.4 million square feet have been delivered already this year.
Yardi Matrix has previously predicted that up to 370 million square feet of new space is needed annually in the US to meet industrial demand, totaling 1.8 billion through 2026.
Phoenix continues to be the country’s hottest market for industrial development, Yardi Matrix reported, with 54.1 million square feet currently under construction, representing 15.6% of stock. Yardi Matrix estimates that manufacturing accounts for 12.5 million square feet under construction in Phoenix, due to the attraction of large semiconductor facilities such as a multibillion-dollar plant from Taiwan Semiconductor Manufacturing Co.