U.S. Industrial Market Outlook – December 2023

Industrial sales volume amounted to $48.6 billion year-to-date in November, the latest Yardi Matrix industrial report shows.

Report Highlights

• National in-place rents for industrial space averaged $7.60 per square foot at the end of November, a 7.7 percent increase from the same time last year and 4 cents more than October 2023.

• Nationwide industrial vacancy remained virtually unchanged from the previous month, clocking in at 4.6 percent at the end of November.
• Industrial sales totaled $48.6 billion year-to-date in November.
• The average price for industrial properties was $130 per square foot.
• Some 505.2 million square feet of industrial space was underway in the country as of November.

Southern California’s rent surge continues

In November, the average national in-place rents for industrial space stood at $7.60 per square foot, reflecting a year-over-year increase of 770 basis points and a 4-cent rise compared to October 2023, Yardi Matrix data shows. Within the national rankings, the Southern California region maintained its dominance, with the only three markets experiencing double-digit growth in rents over the past 12 months: The Inland Empire saw a 15.2 percent increase, Los Angeles recorded a 12.7 percent rise and Orange County witnessed an 11.6 percent uptick.

Concurrently, the national industrial vacancy rate remained largely unchanged from the previous month, standing at 4.6 percent as of November. Initially starting near 4 percent in the first half of the year, the vacancy rate escalated in the second half due to a normalization of demand and the influx of new supply. In the Inland Empire, rates rose from below 2 percent at the beginning of the year to 4.9 percent in November.

Industrial construction sees significant slowdown

As of November, the under-construction industrial pipeline encompassed 505.2 million square feet, equivalent to 2.7 percent of the total stock, according to Yardi Matrix data. A nearly 50 percent reduction in industrial construction is observed this year, attributed to increased financing costs and diminished demand for new space. Despite the overall slowdown, Dallas and Phoenix continue to lead national industrial development, jointly initiating over 17 percent of all starts nationwide.

Dallas launched 26 million square feet of starts and Phoenix witnessed an additional 22.6 million square feet. However, both markets experienced a substantial decline from the previous year, with Dallas initiating 49 million square feet and Phoenix 41.3 million square feet during the same period. Industrial investment year-to-date in November reached $48.6 billion, with properties trading at an average of $130 per square foot.

Read the full Matrix Industrial National Report-December2023.