The under-construction pipeline is nearly two-thirds the size it was at this time last year, according to the latest Yardi Matrix national industrial market outlook.
Report Highlights
- National in-place rents for industrial space averaged at $7.85 per square foot at the end of March, a 7.3 percent increase from March 2023.
- Nationwide industrial vacancy recorded a slight uptick from the previous month and averaged 5.2 percent at the end of March.
- Total industrial transaction volume amounted to $10 billion in the first quarter of 2024.
- The under-construction pipeline featured 405.9 million square feet of industrial space as of March.
Industrial rent surges: a 730 basis-point increase
In March, the average national rent for industrial space reached $7.85 per square foot, showing a notable 730 basis-point rise when compared to the same time last year. Yardi Matrix data indicates a 17-cent increase compared to March 2023. Miami leads with an 11.9 percent year-over-year rent growth, closely followed by the Inland Empire with an 11.8 percent increase. Los Angeles secures the third spot with an 11.2 percent rise, while Orange County surpasses the 10 percent mark with a growth rate of 10.8 percent.
Simultaneously, national industrial vacancy reached 5.2 percent in March, up 20 basis points from the previous month. Recent vacancy rate increases stem from various factors. Between 2022 and 2023, the market experienced an influx of over 1 billion square feet of new supply, while the e-commerce boom slowed down.
Economic uncertainty, inflation and interest rate hikes have made tenants cautious about signing leases, prioritizing cost control over rapid leasing. This shift has moderated the leasing activity that drove vacancy rates to record lows post-pandemic. Vacancy rates were lowest in Columbus, Ohio, and Kansas City, Miss. (2.4 percent), Indianapolis (3.2 percent), Nashville, Tenn. (3.3 percent) and Phoenix (3.7 percent).
Industrial investment reaches $10 billion milestone
As of March, Yardi Matrix reveals some 405.9 million square feet of industrial space was under construction nationwide, comprising 2.1 percent of total stock. Construction activity has notably decreased, with the under-construction pipeline now reduced by two-thirds compared to last year. This decline, influenced by normalized demand and increased capital costs, is particularly evident in the Inland Empire, where construction has dropped from 27.2 million to 9.2 million square feet.
Among the areas with the largest pipelines relative to stock percentage, Phoenix leads with 10.8 percent (41.7 million square feet underway), followed by Charlotte, N.C. (3.9 percent, 12.3 million square feet), Kansas City, Miss. (3.9 percent, 12.3 million square feet), Memphis, Tenn. (3.4 percent, 10 million square feet), Denver (2.9 percent, 7.9 million square feet) and Dallas-Fort Worth (2.6 percent, 24.5 million square feet).
Meanwhile, industrial investment during the first quarter of 2024 reached $10 billion, with properties trading at an average of $147 per square foot. Sales activity was concentrated in the Bay Area ($1.7 billion), Dallas-Fort Worth ($831 million), Chicago ($585 million), Los Angeles ($545 million) and New Jersey ($520 million).
Read the full Yardi Matrix Industrial Market Outlook: April 2024.
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