Some 619 million square feet of industrial space was under construction in the U.S. as of May, while deliveries amounted to 202 million square feet, according to the latest Yardi Matrix industrial report.
Report Highlights
- National in-place rents for industrial space averaged at $7.29 per square foot at the end of May, a 7.4 percent increase from the same time last year.
- Nationwide industrial vacancy averaged 4.3 percent in May, up 20 basis points from the previous month.
- Industrial sales totaled $16.3 billion year-to-date in May.
- The average price for industrial properties stood at $129.0 per square foot, down 1.3 percent from the second quarter last year.
- The under-construction pipeline featured 618.9 million square feet of industrial space as of May.
Industrial Vacancy Varies Amid Rising Rents
National in-place rents for industrial space averaged $7.29 per square foot in May, a 740 basis-point increase on a year-over-year basis and 11 cents more when compared to April. Port markets continue to post the highest increases, with the Inland Empire (17.1 percent year-over-year change), Los Angeles (12.8 percent), New Jersey (10.0 percent) and Boston (9.7 percent) leading the way in this aspect.
The national vacancy rate was 4.3 percent at the end of May, a 20-basis-point increase from the previous month, the latest Yardi Matrix industrial report shows. Markets with easy entry for new development are at higher risk of oversupply, while port markets are expected to maintain low vacancy rates. As of May, the lowest vacancy rates in the country were found in Columbus (1.7 percent), the Inland Empire (2.2 percent), Indianapolis (2.7 percent), Charlotte (3.1 percent) and New Jersey (3.1 percent).
Nationwide industrial transactions totaled $16.3 billion at the end of May, the latest Yardi Matrix industrial report shows. Investors concentrated their efforts in the Inland Empire ($1.9 billion year-to-date through May), Los Angeles ($1.1 billion) and the Bay Area ($1.1 billion). Despite a decline in sales volume, prices have maintained a relatively steady level. The average price per square foot for industrial transactions stood at $129 in the second quarter, showing only a slight decrease of 1.3 percent when compared to the same period last year.
Industrial Construction: Deliveries Surge, Starts Decline
A total of 618.9 million square feet of industrial space was under construction in the U.S. at the end of May, representing 3.4 percent of total stock. Meanwhile, industrial deliveries in the first five months of 2023 totaled 202.0 million square feet. Industrial construction starts have decreased due to higher interest rates and stricter credit standards. From January to May 2021, 211.6 million square feet of industrial supply began construction, while in the same period last year, 240.5 million square feet broke ground. In contrast, only 109.6 million square feet began construction by May 2023.
Although the data is not yet complete, it is evident that construction starts have significantly slowed down. However, Phoenix and Dallas remain exceptions as they have seen 13.5 million and 13.0 million square feet of industrial starts respectively, accounting for nearly a quarter of all construction this year. No other market has exceeded 5.5 million square feet of new construction year-to-date in May.
Read the full Matrix Industrial National Report-June 2023.
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