National industrial vacancy rates rose to 5.0 percent in February, marking a 20-basis point increase from the previous month, according to the latest Yardi Matrix national industrial market outlook.
Report Highlights
- National in-place rents for industrial space averaged $7.68 per square foot at the end of February, a 7.5 percent increase from the same time last year but 4 cents less than February 2023.
- Nationwide industrial vacancy increased slightly, clocking in at 5.0 percent at the end of February.
- Industrial sales totaled $5.7 billion year-to-date in February.
- The average price for industrial properties was $132 per square foot.
- Some 419.8 million square feet of industrial space was underway in the country as of February.
Demand bounces back, rents remain steady
The average national rent for industrial spaces hit $7.68 per square foot at the end of February, showing a significant rise of 750 basis points from the same time last year. However, rents dropped by 4 cents compared to February 2023, according to Yardi Matrix data. The Inland Empire stood out with an impressive 12.7 percent year-over-year increase, leading the national rankings. Miami followed closely with a 12.0 percent rise, while Orange County and Los Angeles exceeded the 10 percent mark with growth rates of 11.4 percent each.
On the other hand, national industrial vacancy rates climbed to 5.0 percent in February, up by 20 basis points from the previous month. The increase in vacant spaces can be attributed to a surge in new supply entering the market alongside a decrease in demand, which brings some relief to highly competitive markets. Vacancy rates were at their lowest in Kansas City, Miss. (2.5 percent), Columbus (2.7 percent), Charlotte, Indianapolis (3.1 percent each), Phoenix (3.2 percent) and Nashville, Tenn. (3.5 percent).
Industrial starts see significant slowdown
Yardi Matrix reveals that at the end of February, the under-construction pipeline boasted 419.8 million square feet of industrial space, making up 2.2 percent of the total stock. A combination of factors like increasing interest rates, stricter construction loan requirements, stabilized industrial demand and economic uncertainty have collectively subdued industrial construction activity, which had seen a surge in 2021-2022.
New construction starts took a nosedive of over 40 percent from 2022 to 2023, with only 341.9 million square feet initiated last year. In the beginning of 2024, Yardi Matrix observed merely 20.0 million square feet, indicating a substantial slowdown in construction.
The cities with the largest pipelines relative to their stock were Phoenix (11.1 percent, 42.6 million square feet underway), Charlotte (4.1 percent, 12 million square feet), Kansas City, Miss. (4.1 percent, 11.2 million square feet), Memphis, Tenn. (3.4 percent, 10 million square feet), Dallas (2.9 percent, 27.2 million square feet) and Denver (2.8 percent, 7.3 million square feet).
Industrial investment during the first two months of 2024 reached $5.7 billion, with properties trading at an average of $132 per square foot.
Read the full Yardi Matrix Industrial Market Outlook: March 2024.
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