Industrial investment soared to $52.1 billion in 2023, with properties trading at an average of $129 per square foot, according to the latest Yardi Matrix industrial market outlook.
Report Highlights
- National in-place rents for industrial space averaged $7.70 per square foot at the end of December 2023, a 7.4 percent increase from December 2022.
- Nationwide industrial vacancy remained unchanged from the previous month and stood at 4.6 percent in December.
- Total industrial transaction volume amounted to $52.1 billion at the end of 2023.
- Industrial assets changed hands at an average of $129 per square foot.
- The under-construction pipeline featured 462.9 million square feet of industrial space as of December 2023.
Midwest falls behind industrial rent growth
Industrial rents surged in December 2023, reaching $7.70 per square foot on average nationwide, as reported by Yardi Matrix in the latest industrial market outlook. This marked a substantial 740-basis-point increase compared to the previous year, along with a 10-cent rise from the previous month. Southern California particularly stood out, witnessing significant rental rate growth over the past year. The Inland Empire recorded an impressive 14.9 percent increase in rents.
Conversely, the Midwest experienced slower rent growth, with Detroit (3.0 percent year-over-year growth), Chicago (3.8 percent) and Kansas City (3.9 percent) showing some of the smallest gains. While demand remained robust in these regions, the presence of ample land on the outskirts of metropolitan areas allowed for a swift supply response, which restrained rent increases commonly seen in port markets.
The national industrial vacancy rate remained relatively stable, holding at 4.6 percent by the end of 2023. However, it's worth noting that this rate had risen by 70 basis points since the beginning of the year due to the delivery of a historic amount of new supply, coinciding with reduced demand for space.
New-supply pipeline slows
According to Yardi Matrix, the under-construction pipeline featured 462.9 million square feet of industrial space as of the end of 2023, accounting for 2.4 percent of the total stock. This represents a substantial drop from the peak of 742.3 million square feet observed in December 2022. The decrease in new construction projects can be attributed to the continuous deliveries and a reduced pace of new project launches compared to previous years.
Phoenix leads the way with a remarkable 42.4 million square feet of industrial space underway, surpassing Dallas, the second most active market, which had 33.6 million square feet under construction as of December 2023. The Inland Empire takes the third position, with an active pipeline of 19.4 million square feet of industrial space.
Meanwhile, industrial investment throughout 2023 reached $52.1 billion, with properties trading at an average of $129 per square foot. Investors were most active in Los Angeles, where industrial transactions neared the $4 billion mark. The Inland Empire followed closely with $3.9 billion in sales, while Dallas amassed $3.5 billion in transactions.
Read the full Matrix Industrial National Report-January 2024.
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