Industrial Market Real Estate Trends

Industrial Real Estate Outlook – April 2022 

Industrial Real Estate Outlook April 2022 
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Asking Rents Reach New Highs for Industrial Sector

Three Southern California markets rank at the top of the charts in terms of rent and occupancy, according to the latest Yardi Matrix industrial report.

Report Highlights

  • Industrial in-place rents averaged $6.47 per square foot in March, up 4.4 percent from the same time last year.
  • Industrial vacancy nationwide averaged 5.0 percent in March, decreasing by 20 basis points from the previous month.
  • National industrial transaction volume totaled $14.8 billion in the first quarter of 2022, slightly below the $18.6 billion recorded in the first quarter of 2021.
  • Neary 60 million square feet of industrial space was delivered in the first three months of 2022.

National in-place rents for industrial space averaged $6.47 per square foot in March, increasing by 4.4 percent on a year-over-year basis and two cents when compared to February. Average rents surpassed double-digit values in Orange County ($11.80 per square foot), the Bay Area ($10.99) and Los Angeles ($10.45), driven by the scarce availability of developable land.

The cost of a new lease in the last 12 months continued its upward trajectory, reaching an average of $7.35 per square foot, 136 basis points higher than the average rental rate. While port markets posted the largest spreads between average rental rates and new leases, Midwestern markets such as Kansas City or Denver had a lower average rate for new leases than the market average.

Vacancies continue to tighten in California

National industrial vacancy stood at 5.0 percent in March, a 20-basis-point decrease from the prior month. Vacancy was lowest across most California markets, with the Inland Empire (0.7 percent), Los Angeles (2.1 percent), Central Valley (2.7 percent) and Orange County (3.4 percent) leading the way in this sense. Meanwhile, markets with an outdated industrial inventory such as Boston (10 percent) or Cincinnati (9.5 percent) posted the highest vacancies.

Pipeline, average sale prices on the rise

Some 621.7 million square feet of industrial space was underway across the nation at the end of March—accounting for 3.6 percent of total stock—while 653.2 million square feet are in planning stages. Industrial deliveries in the first quarter of 2022 amounted to more than 60 million square feet, with the bulk concentrated in Dallas-Fort Worth (4.5 million square feet) and Indianapolis (3.7 million).

Meanwhile, industrial transactions totaled $14.8 billion year-to-date in March. The amount was slightly below the volume recorded over the same period last year, not counting a lag in collecting data. Average sale prices reached $125 per square foot in the first three months of the year, representing a 34 percent uptick when compared to the first quarter of 2021. Of the 120 markets covered by CommercialEdge, 41 recorded an average sale price increase exceeding 50 percent between 2019 and 2021.

Read the full Yardi Matrix Industrial Report-April 2022

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Corina Stef

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