Five More High-Growth Industrial Markets That are Poised to Thrive

Yesterday we looked at five emerging markets ripe for additional industrial development, as selected by Colliers. Today we continue our reporting with five more markets from Colliers’ list that feature outstanding connectivity through rail, air, highway, and ports.

Reno-Sparks, Nev. The market is home to best-in-class warehouses, distribution, fulfillment, and manufacturing.

The area serves 60 million people in seven Western states within one day’s drive and its industrial footprint now includes high-tech manufacturing and processing companies, featuring the only operating lithium mine in North America, making it a haven for renewable energy industries.

“With easy access to the California market, a friendly tax climate, affordable energy, ample water, and an excellent quality of life will continue to attract new tenants and relocation from challenged markets,” Colliers writes.

Reno-Sparks is well connected to California, the West Coast, and rail, and air transportation hubs.

Vacancy rates have begun to move higher after a record-low rate of 0.6% in the middle of 2022 – hitting 1.5% at year’s end but it remains one of the tightest in the nation.

An “incredible” 7.4 million square feet of warehouse, distribution, manufacturing, and flex space development was delivered in 2022, according to the report, and it has 6.6 million square feet of industrial product under construction and another eight million square feet in the early planning stages. Funding for such growth will depend on available capital.

Richmond, Va. Richmond is centrally, well positioned as an East Coast emerging logistics hub serving the mid-Atlantic and beyond – with two-day parcel service up and down the East Coast.

Richmond’s location near the center of the East Coast and access to major arterials results in a two-day drive to reach 50% of the US population.

E-commerce and food and beverage manufacturing have found it to be a great place to do business.

The first LEGO manufacturing facility is planned for the Richmond market, bringing 1.7 million square feet and nearly 1,800 jobs.

Colliers reported that vacancy has maintained sub-3% levels over the past 24 months and is projected to gradually decrease as new product continues to lease up. Meanwhile, 50 percent of leases signed in Q4 2022 were pre-leases.

Asking rents climbed by more than 23%, to $6.71 in the past 12 months, as new high-quality product is continuously added.

“With elevated construction and leasing velocity levels, vacancy will steadily continue to fall,” according to the report.

Salt Lake City. Salt Lake City continues to attract institutional clients for viable options to develop new industrial product based on Utah’s strong economic fundamentals.

“Owners and developers invest in Utah for modern industrial facilities, low unemployment, and an educated and diverse workforce,” according to the report, and “Utah’s manufacturing industry represents approximately a third of all U.S. industrial users, and Utah was listed as the 10th-best state for manufacturing.

Salt Lake is uniquely centralized and easily accessible via modernized rail, air, and highway infrastructure, and has a possible inland port in the future to support its new 850,000-square-foot UPS regional processing facility.

Its overall vacancy rose 94 basis points year-over-year to 2.65% at the end of 2022 and is expected to continue to rise as industrial pipeline projects finish in 2023. New groundbreakings will slow in 2023 due to economic uncertainty and steep construction costs, Colliers estimates.

Savannah Ga. The Port of Savannah continues to outperform the national market as its local industrial real estate market is thriving and is the top growth market in the US in terms of net absorption as a percentage of total inventory (16.7%).

So strong has the port performed, it’s moving container volumes now that it did not expect to reach until 2025. This has led to strong demand for warehouse space, and vacancy rates remain below 1%.

All that, and the effects of the $5.54 billion Hyundai electric vehicle plant now under construction are just beginning to be felt.

Colliers describes the market’s high performance as follows: overall vacancy fell below 2% in 2022, ending at 1.1%, down 143 basis points from 2.5% during the same period in 2021. The high occupancy rate is matched by record levels of new development delivered.

Overall rental rates are expected to increase, having just increased nearly 20% year-over-year, which will be tough to beat in 2023.

Stockton/Central Valley, Calif. The institutional growth in this region has transformed ownership from mom-and-pop to mostly corporate and institutional throughout the market, according to Colliers.

Since 2016, when speculative development in the county re-emerged, total inventory in this market has grown by 30%, to more than 130 million square feet in 2022. Top brands, including Williams-Sonoma, Amazon, Costco, and Lowe’s, moved into the Stockton/Central Valley market in 2022.

In 2022, 4.7 million square feet of quality high-cube warehouse facilities were delivered with another seven million square feet in the pipeline.

Strong demand and a lack of quality space that meets modern users’ requirements have led to increases in lease rates. So much in demand are leases that most landlords will not quote asking rates in the market without an RFP.

“Vacancy could rise further in 2023 if new speculative developments deliver vacant, yet occupier demand should absorb the new space reasonably quickly,” according to the report.