Industrial Momentum Grows in Sunbelt Markets
National in-place rents in September were up 7.1% year-over-year.
The supply landscape in industrial port markets could shift significantly in the coming years, with densely populated Northeastern markets running out of land for industrial properties while legislation in California could make development there more challenging. Meanwhile, the country got a taste of what a labor strike could do to the supply chain earlier this month when East Coast dock workers launched one against operators. The strike was quickly ended with a tentative agreement, but it still caused weeks of shipping disruption.
National in-place rents for industrial space averaged $8.16 per square foot in September, up five cents from August and up 7.1% year-over-year, according to CommercialEdge’s latest national industrial report. In-place rents grew fastest in the Inland Empire, Miami, Los Angeles and New Jersey.
Among non-coastal markets, the Sunbelt saw the highest gains for in-place rents, with Nashville, Atlanta and Dallas-Fort Worth experiencing strong growth. Sunbelt markets are reaping the benefits of continued reshoring and nearshoring momentum, with support services for battery and semiconductor manufacturing plants boosting activity from Georgia to Arizona
The national industrial vacancy rate was 7% in September, up 30 basis points from August, according to the report. Vacancies have crept up as a new supply boom has provided more options to tenants. Across the country, 362.6 million square feet of industrial space was under construction as of September, a significant drop from the past two years but more than any annual total before 2020, according to CommercialEdge.
Industrial sales totaled $43.7 billion through the first three quarters of 2024, with properties trading at an average of $130 per square foot. Sale prices for industrial assets have increased over the past year from an average of $122 per square foot at the end of Q3 2023.
Sales activity in some top markets, however, experienced a cooldown. After ranking among the top four markets for sales volume for the past six years and leading the nation in 2023, sales in the Inland Empire slipped slightly this year and the average price dropped to $188 per square foot, down from $225 in 2022, according to the report.
Detroit became the tightest industrial market in the Midwest, with vacancy standing at 4.6%, surpassing Kansas City as the regional leader in occupancy. In the South, Miami remains the priciest industrial market, with in-place rents averaging $11.87 per square foot. Only Miami and the Inland Empire saw double-digit rent growth of markets nationwide.
In the Northeast, industrial construction has slowed across all top markets. While leading the region in industrial construction, Philadelphia saw its pipeline shrink from 16.1 million square feet to 12.7 million square feet over the past year.