So far this year, stabilization has been the word for industrial real estate. Considerable reshoring tailwinds are contributing to a surge in manufacturing development. Still, the overarching trend in industrial is of rising vacancies in most markets, even as some experience double-digit rent growth.
As more domestic manufacturing facilities near completion in key markets, secondary development from support operations is sure to follow. These new reshoring projects also stand to become an additional cog in the global supply chain which has been tested several times in recent memory.
To best capture the state and direction of the industrial real estate market, we looked at key performance indicators across 30 major industrial markets in the U.S., tracking them each quarter. Markets are ranked based on several metric categories: vacancy, pipeline, average rent, upcoming loan maturities, and quarterly shifts in online searches for industrial space.
See the methodology section for details and read on for highlights of the best-scoring markets, followed by a breakdown of the ranking report by metric category.
Key Takeaways
- Overall: Phoenix nabbed the #1 spot in our ranking report for industrial real estate, with Charlotte and Miami completing the podium.
- Average rent: Orange County boasts the highest rent per square foot at $15.7, while all but one out of 30 markets in the study saw rent increases in the last year.
- Vacancy: Bridgeport, Conn., boasts the lowest vacancy nationwide; 28 out of 30 markets saw rising vacancies year-over-year.
- Industrial construction: Slowing construction across the board translated into a pipeline of 200 million square feet across the 30 major markets in the study, with Phoenix having the largest upcoming inventory at 32.6 million square feet.
- Average sale price: The Bay Area recorded the highest average sale price per square foot at $460 in the last 12 months, followed by Orange County’s $304 and Los Angeles’ $285.
- Loan maturities: Miami, Kansas City and Boston have the lowest percentages of industrial loans maturing in 2024.
- Search trends: Houston, Miami and Baltimore recorded the most online interest for industrial real estate, while the Twin Cities saw search interest grow the most year-over-year.
Top 10 Best-Scoring Industrial Markets
As the industry works through the absorption of recently delivered warehouse/distribution space over the past few years, manufacturing construction is a bright spot in a market that has been challenged with high costs and expensive capital.
Peter Kolaczynski, Director, CommercialEdge
Phoenix stands out as the best-ranking industrial market in Q3, with most of the market’s points being derived from its accelerated industrial development. In fact, the Valley of the Sun’s industrial inventory has 32.6 million square feet of space underway, constituting an expansion of 8.7%. This represents the largest projected growth nationwide, and a stand-out amid generally dropping pipelines. Other impressive figures, such as the 6 million square feet of space delivered in Q3 alone and a 9.2% year-over-year (Y-o-Y) rent growth also stand testament to the market’s stand-out status.
At #2, Charlotte is continuing to reap the benefits of the e-commerce boom as an emerging logistical center. The market has the second-lowest vacancy out of all markets included in the study at 4.1%. Compounded with the second-highest rent growth in the ranking at 14.3% Y-o-Y, Charlotte stands out as a tight market even as the national trend of normalization continues. After delivering 2.7 million square feet of space in the third quarter, the market now has 6 million square feet of industrial space underway — equivalent to 1.83% of its current inventory — which may provide further leeway as it comes online.
Despite being the smallest industrial market in the study by current inventory, Miami claimed the third-best score in Q3 2024, deriving most of its points from its rising rents and steady vacancy rate. Rents in the Magic City rested at $11.9 per square foot in Q3 2024, up 12.8% from Q3 2023 for the third-highest increase nationally, while the market also recorded the fifth-smallest vacancy increase quarter-over-quarter (Q-o-Q) to reach 4.8%.
Columbus reached #4 thanks to good showings across the board, with a vacancy rate of 5.1% (up from 3.7% in Q3 last year) and deliveries in the last quarter totaling 2.17 million square feet of industrial space. Moreover, online search interest in industrial space across Ohio is up 20% Y-o-Y, also boding well for the Columbus market. Rents were up 8.7% Y-o-Y, bringing the current average rent to $5.0, still the lowest among all top 10 markets.
In fifth place, Atlanta earned its spot on the list with above-average scores in most metrics, including a fifth-best showing in loans maturing this year and a vacancy rate of 6.1%, up 0.4% Y-o-Y. Still, industrial construction here is in line with the national trend, with the market growing by less than 0.5% in Q3 and a further expansion of approximately 1.5% from industrial properties currently in the works.
At #6, Bridgeport boasts a vacancy rate of just 3.8%, making it the tightest market in the study in this regard. Moreover, Park City also held that title in Q3 2023 with a vacancy rate of 3.5%. This comes in the context of a pipeline of less than 500,000 square feet for a market expansion of just 0.22%, meaning the high-demand Connecticut market is likely to retain its high occupancy status in the near future.
As one of Southern California’s most robust industrial areas, the Inland Empire secured a 7th-place finish on our Q3 2024 list. Even as several years of record development pushed vacancies up 0.9% Y-o-Y to 7.3%, new lease premiums remain high in the market. Average rent reached $10.7 at the end of the third quarter, marking the highest Y-o-Y rent increase out of all markets in the study at 16%. Online interest for industrial real estate is also up considerably in the market, even as searches dropped overall in California. At the same time, development has slowed considerably here after the 2021-2022 glut, with deliveries in Q3 2024 totaling 1.1 million square feet and 10.1 million more in the pipeline.
Dallas-Fort Worth earned 8th place in our ranking with stand-out performances in sale prices and Q3 deliveries. The average sale price per square foot over the previous 12 months stands at $123, marking a 12.7% increase from the average sale price during the 12 months prior — the highest increase among all top 10 markets. Additionally, DFW delivered 4.66 million square feet of new industrial stock in Q3 2024, marking the second-largest expansion by square footage. Of course, that figure is less impressive when compared to the market’s total inventory of almost 1 billion square feet of space, and so is the space in the pipeline which totals just under 17 million square feet of space.
Detroit ranks as the 9th-highest scoring market in our analysis. The market’s vacancy rate of 4.6% was the third-lowest in the ranking, though it is trending up after a 0.5% yearly increase. Meanwhile, rents have climbed less steeply in Motor City than elsewhere, increasing by 3.6% Y-o-Y to rest at $6.9 at the end of Q3. The market also recorded the sixth-highest increase in online search volume for industrial real estate.
Closing out the top 10, Orange County scored well for its vacancy rate at the end of Q3, vacancy rate growth, rent growth and loan maturities. At $15.7 per square foot, Orange County has the highest average rent cost out of all 30 major industrial markets on the list, ahead of the Los Angeles market’s $15.0 and the Bay Area’s $13.5. Still, new projects have slowed to a crawl in market, currently encompassing just 780,000 square feet of new space — or a 0.4% expansion of current inventory.
Top-Scoring Industrial Markets for Each Ranking Metric
Continuing its upward trajectory, the Inland Empire recorded the largest rent increase Y-o-Y, jumping 16% to $10.7 per square foot. Charlotte was the runner-up in this metric, with rents rising 14.3% between September 2023 and September 2024, reaching $7.0. The podium for the metric was completed by Miami, where rents increased 12.8% in the last year.
Other markets recording double-digit rent increases include Los Angeles (up 12.3%); Orange County (10.9%); New Jersey (10.5%) and Boston (10.2%). Notably, all markets with double-digit rent growth except Charlotte are either high-transit port markets or in the vicinity of Los Angeles, underlining the ongoing demand for industrial space in key markets most vulnerable to global supply chain issues.
1. Top-Scoring Markets by Vacancy Rate at Close of Q3
Looking at vacancy rates, the industrial market has notably more headroom compared to previous years, thanks in no little part to record deliveries and cooling demand.
The lowest vacancy rate as of the end of Q3 2024 was recorded by Bridgeport, Conn., at 3.8%. Following it were four markets with vacancy rates situated between 4% and 5%: Charlotte at 4.1%, Detroit at 4.6%, Portland at 4.7% and Miami at 4.8%.
Columbus and Nashville were tied for 6th with vacancy rates of 5.1%, followed by Kansas City at 5.2% and Orange County at 5.3%.
The only market to break the 10% mark was Tampa, Fla., where the rate rested at 10.3% as of September. While some high-demand markets are still experiencing accelerated demand and low vacancies, other markets are still balancing cooling demand with a saturated industrial offering.
2. Top-Scoring Markets by Q-o-Q Percentage-Point Change in Vacancy Rate
Looking at points awarded for percentage point changes in vacancy rate, Boston was the clear winner, being one of only two markets where vacancy rates actually contracted in the third quarter. Specifically, Boston industrial real estate vacancies dropped 0.4 percentage point to 8.4%. While that rate is still on the higher end of markets nationwide, the net positive vacancy rate still signals that the market may be entering a new phase and beginning to absorb recently delivered supply.
The situation is similar in Houston, where vacancies dropped 0.3% to rest at 7.1% in September. New supply is also dwindling in Space City, allowing for vacancies created during the development heyday around 2022 to be filled.
Up next, California’s Central Valley and the Seattle market both recorded 0.1-percentage point increases to their vacancy rates to reach 6.6% and 7.3%, respectively. Miami’s vacancy rate increased by 0.2% over the quarter, while those in Bridgeport and Charlotte grew 0.3%.
Of the 30 markets in our study, 19 recorded vacancy rate increases between 0.1 and 1 percentage points, while a further 7 markets saw vacancies growing by between 1 and 2 percentage points. The largest increases took place in Indianapolis and Tampa, with both markets’ vacancies increasing by 3.3 percentage points.
1. Largest Industrial Market Expansions in Q3 2024
The third quarter of 2024 saw a continuation of the trends that prevailed throughout the rest of the year. Buildings coming online are mostly projects started more than a year ago, and deliveries have slowed to a trickle in several markets as a result.
Phoenix headlined the list of Q3 deliveries, seeing 6 million square feet of industrial space go online., equivalent to 1.6% of the market’s current stock. Dallas-Fort Worth was next with 4.7 million square feet of space, followed by Atlanta’s 2.8 million. Both markets expanded by 0.48% with their respective Q3 deliveries.
Charlotte ranked fourth in terms of industrial completions in the third quarter with 2.7 million square feet total, while fifth-place Indianapolis delivered 2.5 million square feet. The Central Valley, Detroit and Columbus completed the list of markets delivering more than 2 million square feet of industrial space each in Q3, with an additional 9 markets delivering between 1 and 2 million square feet.
In terms of percentage expansion, Miami was the only market besides Phoenix where Q3 deliveries totaled more than 1% of current stock. Charlotte, Tampa and Columbus saw the next-largest expansions last quarter at 0.84%, 0.70% and 0.69%, respectively.
2. Largest Industrial Space Pipelines Under Construction in Q4 2024
As mentioned previously, the record-breaking pipelines of two years ago are now past. Speculative projects have mostly already been delivered, leaving the projects started in the current high-interest environment to make up the majority of national pipelines. The result is a drop of around two-thirds in terms of industrial space under construction across the U.S.
However, that drop has not been even across all markets. Besides having the most deliveries Q3, Phoenix also has a sizable pipeline encompassing more than 32.6 million square feet of industrial space — almost double the amount under construction in the runner-up market. The current space underway is still a drop from the 53-million-square-foot figure at the start of 2023, but will still bring a considerable expansion of 8.7% to the market — another metric in which Phoenix leads.
Meanwhile, Dallas-Fort Worth — the nation’s second-largest market by total size — has seen its pipeline drop to just under 17 million square feet. That number is down almost 75% from its high of more than 64 million square feet at the end of 2022. The amount currently under construction stands to expand the Metroplex industrial market by around 1.7%.
The markets with the next-largest pipelines include Philadelphia (12.7 million square feet of space in the works), Kansas City (10.7 million square feet), the Inland Empire (10.2 million square feet) and Memphis (10 million square feet). All remaining 24 markets had pipelines of less than 10 million square feet of space each. Meanwhile, save for Phoenix’ sizable pipeline, expansion rates for the remaining markets ranged between 3.7% (Kansas City) and 0.2% (Bridgeport).
Markets seeing the largest sale price increases over the last 12 months included Nashville, the Bay Area and Baltimore. In 16 markets, average sale prices per square foot increased year-over-year, while the remaining 14 markets in our study saw average sale prices dropping.
The highest average sale price over the last 12 months (Oct 2023-Sept 2024) was recorded in the Bay Area at $460 per square foot, up from an average of $309 per square foot between Sept 2022 and 2023.
Up next, Orange County saw properties trade for $303.9 per square foot on average over the last 12 months, equating to an increase of 0.9% Y-o-Y. Two other Southern California industrial markets followed with Los Angeles and the Inland Empire, which recorded average sale prices of $284.7 and $254.9 per square foot, respectively.
Other markets breaking the $200-per-square-foot mark included Miami ($222.4), New Jersey ($217.7) and Seattle ($211).
Near-term maturing loans and subsequent delinquencies are less of a concern in industrial than office. However, we still awarded points for markets with a low share of loans reaching maturity during the current year to offer an additional indicator of industry-wide directions.
Miami scored maximum points for the loan maturity metric, as only 1.8% of its $7.1 billion in industrial loans is reaching maturity this year. Kansas City and Boston followed with 2.4% and 2.6%, respectively. Meanwhile, at the opposite end of the spectrum, markets with the highest shares of near-term loans included the Central Valley (12.5%), Phoenix (12%) and the Bay Area (9.5%).
Of the 30 markets in our study, 13 saw drops in online search volume for industrial real estate-related keywords. Searches remained steady in three other markets, while the remaining 14 saw online interest in industrial space growing.
Methodology
For this ranking, we compared 30 major industrial markets in the U.S across several indicators — lease rate, vacancy, completions and pipeline activity, average sale price, loan maturities, and online search interest for each location on the list. All individual ranking metrics are explained further below.
We based our analysis on commercial real estate data and research from CommercialEdge and Yardi Matrix, as well as analysis of Google search trends.
A certain number of maximum points was attributed to each metric. This total was evenly distributed between the lowest and the highest metric values in each of the two groups. On this scale, a score was calculated for each location based on its metric values. The factors (metrics or indicators) on which we based the composite scores are explained below.
For average vacancy rate and loan maturity rate, the number of points awarded was inversely proportional to the metric values. For all other indicators, the number of points awarded was directly proportional to the metric values.
- Refers to the year-over-year comparison between average rents in each industrial market between the last month of Q3 2023 and the last month of Q3 2024. This metric reflects the percentage change in rent rates during that 12-month time period.
- Maximum points: 20
- Data source: CommercialEdge
- In this category, we looked at two aspects:
- the vacancy rate for each market in the last month of Q3 2024 (a metric for which we attributed a maximum of 20 points)
- the percentage point change in vacancy rate compared to the last month of Q2 2024 (for which we attributed a maximum of 10 points)
- Maximum points: 30
- Data source: CommercialEdge
- This metric category included three indicators:
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- industrial square footage added during Q3 in each of the locations we included in the ranking (maximum 10 points)
- industrial space added as percentage of total inventory during Q3 (maximum 10 points)
- industrial space under construction at the start of Q4, regardless of projected completion date, as a percentage of total market inventory (maximum 10 points)
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- Maximum points: 30
- Data source: CommercialEdge and Yardi Matrix
- In this metric, we analyzed the average sale price for the last 12 months with available sale data (Sept 2023-Sept 2024) and the average sale price of the 12 months prior to that (Sept 2022-Sept 2023). Markets were then awarded points for the percentage difference between the two average sale prices per square foot.
- Maximum points: 5
- Data source: CommercialEdge
- This metric refers to the total of industrial real estate loans that are due to mature in 2024 as a percentage of total industrial real estate loans in the market.
- Maximum points: 10
- Data source: CommercialEdge
- As a potential indicator of tenant interest in the market, we looked at changes in the monthly average volume of online searches for industrial space compared to the monthly average at the same time in the previous year. We attributed a maximum of 5 points for market-level search volume, and an additional 5 points for state-level search volume.
- Maximum points: 10
- Data source: in-house analysis of Google searches for industrial real estate-related keywords
