Despite economic headwinds, U.S. industrial properties are still a highly desirable asset class with rents on an upward trajectory.
Investors closed $44.4 billion in industrial real estate deals this year through October, compared to $27.9 billion in office sales over the same period, according to the latest industrial report from CommercialEdge. The Inland Empire (a metropolitan area inland of and adjacent to coastal Southern California) and Los Angeles, California had the largest sales volumes year to date with $3.73 billion and $3.55 billion, respectively.
Although a substantial amount of new space was delivered, major markets saw significant year-over-year rent growth even with vacancy rates rising. Industrial rents increased 7.6% year over year in October, averaging $7.55 per square foot. The national industrial vacancy rate rose to 4.6% from 3.9% at the beginning of the year.
The biggest rent increases were in the coastal markets, with the most significant in the Inland Empire, which was up 15.2% year over year in October.
"New leases are still commanding a significant premium, continuing the past year's momentum in pricing," CommercialEdge Director Peter Kolaczynski said. "We are watching sublease availabilities closer, specifically as Amazon puts large newer spaces on the market, but any initial repercussions will likely be localized."
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Average Rent By Metro
| Market | October 2023 average rent | 12-month change | Average rate signed in last 12 months | Vacancy rate |
| National | $7.56 | 7.6% | $10.28 | 4.6% |
| Inland Empire | $9.17 | 15.2% | $18.49 | 4.3% |
| Orange County | $14.01 | 12.3% | $18.94 | 4.6% |
| Los Angeles | $13.58 | 12.3% | $20.57 | 5.9% |
| Miami | $10.62 | 10.3% | $15.81 | 4.3% |
| Boston | $9.98 | 9% | $12.66 | 7.2% |
| Seattle | $10.67 | 8.9% | $15.58 | 4.8% |
| New Jersey | $9.96 | 8.7% | $13.91 | 5.3% |
| Bridgeport, Connecticut | $8.67 | 7.8% | $10.98 | 3.2% |
| Phoenix | $8.41 | 7.5% | $10.96 | 2.4% |
| Atlanta | $5.58 | 7.3% | $8.25 | 3.9% |
| Nashville, Tennessee | $6 | 7.1% | $8.98 | 1.5% |
| Portland, Oregon | $9.28 | 6.9% | $7.91 | 4.3% |
| Dallas-Fort Worth | $5.67 | 6.8% | $18.35 | 3.9% |
| Bay Area | $12.63 | 6.8% | $18.35 | 3.9% |
| Philadelphia | $7.48 | 6.3% | $9.95 | 4% |
Industrial space under construction as of October totaled 512.5 million square feet and accounted for 2.7% of existing inventory, according to the CommercialEdge report. While new supply is high, more than a quarter of it is located in five markets and half is in the top 18 markets.
Phoenix and Dallas-Fort Worth have the largest development pipelines, with 47.3 million square feet and 42.42 million square feet under construction, respectively.
Development is likely to slow because of rising construction costs, difficulties in getting financing, pushback on development and a fear of oversupply.
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