Here is Where Industrial is Growing the Fastest
Some markets are flourishing even as development nationwide slows.
Industrial starts have fallen by nearly half this year to 66.2 million square feet in the third quarter compared to 100.6 million square feet in the first quarter, according to a report from CommercialEdge. Despite the slowdown Dallas and Phoenix continue to lead in new industrial development. These two markets combined were responsible for more than 17% of all industrial starts in the nation, with Phoenix at number one.
Meanwhile rent growth is also occurring, despite the normalization of demand this year, with Southern California clocking in as the only region with double-digit rent growth. Inland Empire, Los Angeles, and Ocean County saw these increases.
The Western markets remained the most expensive in the U.S. Aside from Southern California, Seattle and Portland saw the next-largest growth in asking rents. Conversely, Denver saw the slowest growth and biggest drop in average sale prices, with a 24% decline in 2023.
Rent growth in the Midwestern markets lags behind the national trends. In fact, the leading industrial markets in that region ranked among the slowest in the U.S. Year-over-year increases in rent fell below the national rate of 7.7% in November, even in low-vacancy markets such as Columbus and Indianapolis.
Kansas City saw the largest development pipeline among Midwestern markets, followed by Indianapolis. Chicago had more than 17 million square feet of space under development in 2023. In addition, Chicago remained the leader in sales volume with 1.97 billion in transactions. The Twin Cities came in second with 917 million in sales. Overall, the Midwest registered some of the lowest sale prices year-to-date.
Dallas-Fort Worth leads the South in development and sales volume. Nashville and Charlotte had the lowest vacancy rates in November among the top Southern markets, with Atlanta following. Tampa had the highest vacancy rate in the region as well as the slowest rent growth in the region. Houston saw the slowest growth rate nationwide at 4.1%.
Miami’s activity was significant in the South, with industrial rents rising 9.3%. This brought the average in-place rent to $10.46 per square foot. In addition, new leases signed over the past 12 months averaged $16.02 per square foot.
In the Northeast, there was an increase in vacancies in New Jersey, but the state remained one of the strongest markets in the nation. In-place rents in the state grew 9.1% year-over-year to $10.06 per square foot. At the same time, New Jersey saw $2.53 billion in industrial sales.