Some 595.6 million square feet of industrial space was under construction in the U.S. as of July, while construction starts year-to-date in July totaled 177.8 million square feet, according to the latest Yardi Matrix industrial report.
- National in-place rents for industrial space averaged at $7.39 per square foot at the end of July, a 7.5 percent increase from the same time last year and six cents up from June 2023.
- Nationwide industrial vacancy averaged 4.4 percent in July, down 10 basis points from the previous month.
- Industrial sales totaled $26.9 billion year-to-date in July.
- The average price for industrial properties stood at $131 per square foot, a 5.6 percent increase when compared to the $124 per square foot in 2022.
- The under-construction pipeline featured 595.6 million square feet of industrial space as of July.
Industrial rent gains lowest in Midwest
National in-place rents for industrial space averaged $7.39 per square foot in July, a 750 basis-point increase on a year-over-year basis and six cents more when compared to June. The lowest rent increases were recorded in Midwestern markets such as Indianapolis (3.2 percent increase), Kansas City (3.6 percent) and Chicago (3.9 percent).
The average rate for new leases signed in the last 12 months increased to $9.90 per square foot through July, $2.51 more than the average for all leases, with California markets like the Inland Empire (17.6 percent year-over-year change), Los Angeles (12.6 percent) and Orange County (10.2 percent) seeing the largest spreads between rents.
The national vacancy rate was 4.4 percent at the end of July, a 10 basis-point decrease from the previous month, according to the Yardi Matrix industrial report. As of July, the lowest vacancy rates in the country were found in Nashville (2.0 percent), Indianapolis (2.8 percent), the Inland Empire (2.9 percent) and Phoenix (2.9 percent).
Industrial construction faces challenges & changes
A total of 595.6 million square feet of industrial space was under construction in the U.S. at the end of July, representing 3.2 percent of total stock. In 2021, construction began on 586.2 million square feet, and in the following year, 614.5 million square feet was started. However, in 2023, developers broke ground on only 177.8 million square feet. Rising material and labor costs were already a challenge for new developments, and demand has been stabilizing recently. Now, the increased expenses for construction financing have caused many developers to pause their projects.
As of July, the largest pipeline on a percentage of stock basis in the country was found in Phoenix (15.9 percent, 56.7 million square feet underway). In Dallas-Fort Worth, some 52 million square feet of space was under construction, accounting for 5.7 percent of total stock, followed closely by the Inland Empire (5.1 percent, 31.9 million square feet), Charlotte (4.5 percent, 13.8 million square feet) and Denver (4.5 percent, 11.5 million square feet).
Nationwide industrial transactions totaled $26.9 billion at the end of July, the latest Yardi Matrix industrial report shows. Investors concentrated their efforts in the Inland Empire ($2.8 billion year-to-date through July), Los Angeles ($1.8 billion) and the Bay Area ($1.4 billion). The average price per square foot for industrial transactions stood at $131 at the end of July, a slight increase when compared to the $124 per foot in 2022.
Read the full Matrix Industrial National Report-August 2023.