New industrial starts totaled 147.1 million square feet in the first half of 2023, less than half the amount reported the same time last year, according to the latest Yardi Matrix industrial report.
Report Highlights
- National in-place rents for industrial space averaged at $7.33 per square foot at the end of June, a 7.4 percent increase from the same time in 2022.
- The average rate for new leases signed in the last 12 months rose to $9.76 per square foot through June.
- Nationwide industrial vacancy averaged 4.5 percent in June, up 20 basis points from the previous month.
- Total industrial transaction volume amounted to $21.2 billion at the end of June.
- The under-construction pipeline featured 606.5 million square feet of industrial space as of June.
Construction starts record a drop
A total of 606.5 million square feet of industrial space was under construction across the nation at the end of June, accounting for 3.3 percent of total stock. Industrial deliveries in the first half of the year totaled 202.0 million square feet. New industrial starts year-to-date in June featured 147.1 million square feet, as higher borrowing costs and stabilized demand impacted the market. In contrast, the first half of 2022 witnessed 313.2 million square feet of industrial starts.
Industrial transaction volume across the U.S. totaled $21.2 billion at the end of June, the latest Yardi Matrix industrial report shows. Sales volume in the first half of 2023 has notably decreased compared to the previous year's $55 billion in sales. Investment activity was concentrated in the Inland Empire ($2.4 billion year-to-date through June), the Bay Area ($1.2 billion) and port markets such as Los Angeles ($1.2 billion) and New Jersey ($1.1 billion).
Despite a sharp decline in transaction volume this year, the average sale price of industrial properties has slightly increased to $129 per square foot year-to-date in June. This is $5 more when compared to the $124 per foot recorded the same time last year.
Port markets lead the way in rent gains
National in-place rents for industrial space averaged $7.33 per square foot in June, increasing by 740 basis points on a year-over-year basis and four cents when compared to the previous month. Port and nearby markets recorded the highest increases, led by the Inland Empire (17.4 percent year-over-year change), Los Angeles (13.2 percent), Boston (10.3 percent), Orange County (10.0 percent) and Phoenix (9.0 percent).
The average cost per square foot for new leases signed within the past year continued its upward trajectory, reaching $9.76 per square foot at the end of June. The amount was $2.43 more than the average for all leases. Rates were highest in Los Angeles ($19.92 per square foot), Orange County ($19.51 per square foot), the Bay Area ($19.11 per square foot) and the Inland Empire ($17.25 per square foot).
Industrial vacancy nationwide stood at 4.5 percent at the end of June, a 20-basis-point increase from the previous month, the latest Yardi Matrix industrial report shows. The highest vacancy rates in the country were found in Houston (9.2 percent), Boston (7.8 percent) and Denver (6.8 percent).
Read the full Matrix Industrial National Report-July 2023.
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