Here Are the Top Landlord and Tenant-Friendly Industrial Markets

Slow and steady is winning the race for industrial landlords in the U.S. According to a new report by Cresa, landlords in Sun Belt markets that have experienced rapid growth over the past four years are now facing challenges with oversupply and rising vacancies. In contrast, landlords in markets that grew more steadily after the pandemic are gaining leverage over tenants due to tighter supply.

Austin, Phoenix, and Las Vegas, once booming industrial hubs during the pandemic-fueled e-commerce surge, are now seeing vacancy rates climb as new projects come online faster than tenants can fill them. Additionally, the rise in sublease space is providing tenants in these markets with more bargaining power than they’ve had in recent years.

Markets like Cleveland, Richmond, and Milwaukee are capitalizing on tighter industrial supply and steady demand, positioning themselves favorably amid shifting market dynamics. Vacancy rates in these metros are significantly lower than in their high-growth counterparts, allowing landlords to increase rents at a more measured pace.

Cresa ranked the following cities as the most tenant-friendly and landlord-friendly.

Landlord-friendly markets, according to Cresa, include Hickory, NC, Toledo, Cleveland, Knoxville, Madison, Fort Wayne, New Orleans, Akron, Grand Rapids, Tulsa, Milwaukee, Hartford, Rochester, Long Island, Lancaster, Omaha and Albany.

Tenant-friendly markets include Austin, Inland Empire, Reno, Boise, Salt Lake City, Charleston, Las Vegas, Phoenix, Houston, San Antonio, Spartanburg, SC, Indianapolis, Savannah and Laredo.

Craig Van Pelt, the author of the report and the head of research at Cresa, noted that although economic conditions have produced mixed outcomes for landlords and tenants, long-term demand for industrial space is ultimately driven by consumer behavior.

“Unfortunately, economic conditions are mixed,” Van Pelt said. “While consumer spending remains firm, consumer sentiment is down. Speculation about a decrease in interest rates is welcome news for many, but inflation remains stubbornly elevated. Additionally, unemployment continues to rise, though it is still below historical averages. This means that industrial occupiers will be making decisions in a clouded economic setting, while also having opportunities to leverage a stalled industrial market.”

Cresa analyzed the top 100 markets by total square footage, ranking each city based on quarterly and annual rent changes, total vacancy and availability, sublease space, net square footage delivered over the past year as a fraction of inventory, and the square footage under construction as a percentage of inventory. These data points were then aggregated into a final index.

While landlords in steady-growth cities outperform their high-growth counterparts, the outlook for further development in these markets remains uncertain. Oversupply issues in regions that have attracted new residents raise questions about the viability of new projects in these steady metros, highlighting the complex economic dynamics at play.