United States Industrial Outlook | 2017
With already record-high rents, price tags for industrial space continue to soar, and vacancy is now at a 17-year low.
2017 is expected to stay landlord-favorable in 88 percent of the markets we track. Most existing spaces are leased out and new deliveries are hitting the market at steady pre-lease rates.
Nationwide, there’s simply little to no industrial product available.
The overall construction pipeline continues to grow, though net absorption is still outpacing new deliveries. The typical first-quarter slowdown produced fewer deliveries this winter, but we expect more activity to close out the year. And as existing top-tier submarkets start seeing a lack of space to build new product, submarkets traditionally not considered for speculative development have potential to be tapped into.
The resounding strength of industrial tenant demand coupled with the tightest fundamentals yet experienced in the sector continued to drive the sixth consecutive year of rent growth.
Responding to healthy consumer spending and growing e-commerce sales, the combined logistics & distribution and 3PL sectors committed to 24% of total leasing activity.
The construction pipeline continues to grow, led by a 29% increase of construction activity of build-to-suit properties (up from the fourth quarter).
Total inventory tops 12.5 b.s.f. led by Chicago, Los Angeles and Philadelphia/Harrisburg.
U.S. average asking rents jumped to $5.25 per square foot. Northern New Jersey saw the highest year-over-year rent growth, followed by San Francisco Mid-Peninsula, Seattle and Inland Empire.
Annual net absorption grew 11.9% to 58.4 m.s.f. Philadelphia, Dallas and Atlanta led absorption, contributing 34% to the U.S. total alone.
Vacancy rates fell in nearly three-quarters of U.S. markets, dropping overall U.S. vacancy to 5.3%. California continues to have the tightest markets in the country, led by Los Angeles (0.9%), East Bay (1.2%) and Orange County (1.5%).
206.7 m.s.f. is currently under construction, and an estimated 247.2 m.s.f. is expected to deliver through year end.
View interactive version with additional market details.
Managing Director, Industrial & Logistics
Vice President, Americas Industrial Research
Manager, Americas Industrial Research