In the third quarter of 2018, the U.S. industrial market benefitted from record-high port volumes, positive absorption and a vacancy rate that remained below 5.0 percent despite the addition of new inventory. The continued enthusiasm for industrial product is examined in Transwestern’s third-quarter industrial outlook, which revealed rent growth across nearly every market tracked. Oakland/East Bay and Sacramento, California, along with Long Island in New York, all posted year-over-year rent growth more than twice the national average of 7.3 percent.
“High-quality infill remains in high demand by investors, causing average rent to blow by the $6 per-square-foot threshold,” said Matthew Dolly, Research Director in New Jersey. “While construction continues at an aggressive pace, it can’t keep up with the red-hot demand. As a result, we’ve seen the U.S. industrial vacancy rate drop 300 basis points in the past five years.”
California’s Inland Empire, Atlanta and Chicago led the nation in absorption during the most recent quarter, with the Inland Empire topping 25 million square feet of absorption for the previous 12 months. Preleased deliveries accounted for a significant percentage of this volume.
Even in the face of rising protectionism, trade disputes and slightly softer retail sales, the report attributes industrial real estate’s enduring popularity to robust gross domestic product growth, strong consumer spending, and job growth in the construction, manufacturing, transportation and warehousing sectors.
“The expected growth in online holiday shopping bodes well for distribution and e-commerce, but we’re also seeing manufacturers and assemblers signing leases, underscoring the overall strength of the sector,” said Sandy McDonald, Research Director in Chicago. “If there is any reason to be cautious, it would be concerning the ability of some markets to attract and retain large-capacity tenants for new construction outside the inner core.”
