Industrial Market Real Estate Trends

U.S. Industrial Market Outlook – October 2023

US Industrial Market Outlook October 2023
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Industrial sales volume amounted to $40.3 billion year-to-date in September, the latest Yardi Matrix industrial report shows.

Report Highlights

  • National in-place rents for industrial space averaged at $7.51 per square foot at the end of September, a 7.4 percent increase from the same time last year and six cents more than August 2023.
  • Nationwide industrial vacancy reached 4.6 percent in September, up 10 basis points from the previous month.
  • Industrial sales totaled $40.3 billion year-to-date in September.
  • The average price for industrial properties was $135 per square foot, increasing by 9 percent this year alone.
  • Some 535.6 million square feet of industrial space was underway in the country as of September.

Regional disparities in rents, vacancy persist

Industrial in-space rent across the nation averaged $7.51 per square foot in September, showing a significant 740-basis point increase from the prior year and a six-cent uptick from August 2023. Coastal port cities experienced notable rent surges, while inland markets recorded more moderate growth rates.

Markets such as Denver (3.1 percent), Chicago (3.4 percent), Cincinnati, (3.5 percent), Detroit (3.6 percent) and Indianapolis (3.6 percent) saw slower rent growth rates. Houston stands as an exception to this trend, displaying a 3.6 percent rise despite hosting a bustling seaport.

The average rate for new leases signed in the last 12 months increased to $9.93 per square foot through September, $2.42 more than the average for all leases. Port cities like the Inland Empire, Los Angeles and the Bay Area commanded the highest premiums, with additional costs per square foot amounting to $9.18, $6.91 and $6.58, respectively.

In September, the national industrial vacancy rate increased by 20 basis points, reaching 4.6 percent. There has been a remarkable surge in new inventory in recent years, significantly mitigating the challenge of finding appropriate space for many occupants. Nashville marked one of the lowest vacancies in the nation at 1.9 percent, followed by Indianapolis and Phoenix, both at 2.7 percent.

Active pipeline shrinks amid e-commerce shift

The active pipeline comprised 535.6 million square feet of industrial space at the end of September, representing 2.9 percent of total stock. While traditionally substantial in many markets, the under-construction pipelines have shrunk this year, primarily due to a sharp decrease in new project commencements. This decline is a result of adapting to more typical e-commerce demands and facing higher capital expenses.

Phoenix boasted the country's most extensive pipeline in relation to the percentage of available stock, with 46.6 million square feet underway, making up 12.7 percent of the market’s total stock. In Dallas-Fort Worth, 49.3 million square feet of space was under construction, accounting for 5.4 percent of total stock, followed by Charlotte (4.8 percent, 14.6 million square feet), the Inland Empire (4.7 percent, 29.6 million square feet) and Denver (4.2 percent, 10.7 million square feet).

Industrial transaction volume totaled $40.3 billion at the end of September, the latest Yardi Matrix industrial report shows. Investment was concentrated in the Inland Empire ($3.6 billion year-to-date through September), Los Angeles ($3.1 billion) and the Bay Area ($2.2 billion). The average price per square foot for industrial transactions stood at $135 at the end of September, a 9 percent increase when compared to the $124 per foot in 2022.

Read the full Matrix Industrial National Report-October 2023.

About the author

Corina Stef

Corina Stef started her tenure as a music journalist a decade ago and has been occupying a full-time real estate editor and blogger position since 2017. She is a senior associate editor with Commercial Property Executive and Multi-Housing News who focuses on commercial real estate trends and in-depth stories.

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