Current trends in the commercial real estate space show that the industrial sector continues to outpace other sectors of the industry. The sector is currently boasting record-low vacancy rates with plenty of new developments in the pipeline. JLL reported that industrial rents have seen a 5.3 percent year-over-year growth. Since the demand for warehouse and distribution centers is not slowing down, this steady growth is fueled by both the e-commerce sector and the growing manufacturing sector.
Let’s take a look at five markets where the industrial sector is hot right now.
1. Inland Empire, California
National Real Estate Investor recently ranked Inland Empire, California as the top industrial market in the United States. Transwestern (PDF) reported the following stats on the Inland Empire industrial market:
- 528,885,748 square feet of total inventory
- 3.3 percent overall vacancy rate
- 6,522,774 square feet of net absorption
- $6.96 NNN asking rent
- 19,468,787 square feet under construction
2. Dallas-Fort Worth
The Dallas-Fort Worth industrial market is currently experiencing over 19 million square feet of warehouse construction in Q3 2018. The total current warehouse development pipeline is bigger than the rest of DFW’s commercial construction combined. According to Cushman & Wakefield, during Q3, net industrial building leasing in North Texas totaled 5.6 million square feet, up 5.1 million square feet of net leasing during the same period in 2017.
3. Lehigh Valley, Pennsylvania
The Lehigh Valley in Northeastern Pennsylvania offers industrial occupiers great proximity to some of the largest U.S. cities. According to Colliers International, there are 6.5 million consumers within 50 miles and 61.5 million within a 250-mile radius. The region’s industrial market is a hotspot for manufacturers and 3PLs involved in food distribution, e-commerce fulfillment, and the retail supply chain.
4. South Florida
The population in South Florida is booming and the area offers a strategic location as a gateway to the Caribbean and Latin America. The industrial market in South Florida is a powerhouse fueled by consumer spending to international trade and online retailers, resulting in large investments in infrastructure improvements. Since the region offers high barriers to entry and a dwindling land supply, vacancy has been kept low.
5. Nashville, Tennessee
Nashville has become a very dynamic business center with a growing population and talented labor pool fed by the region’s strong concentration of universities and colleges. The Nashville economy is one of the healthiest in the United States with an unemployment rate of just 2.2 percent. This low unemployment rate along with a relatively low cost of living and great lifestyle amenities has made it a great spot for millennials to call home. The area’s strong industrial sector is the result of a fast-growing population that has increased the demand for e-commerce distribution space and a strong automobile-manufacturing base.
As the strongest commercial real estate sector, industrial markets are booming particularly in these five markets. We have seen a dip in vacancy rates and, of course, plenty of positive net absorption, so all trends point to the continued success in the coming quarters.