United States Industrial Outlook | Q2 2017
U.S. industrial market
rents now sit at an all-time high, inching up to $5.35 per square foot in Q2. Given historically low vacancy in most markets, rents continue to accelerate nationwide.
Locations like Northern California's North Bay, Central Valley and East Bay have seen double-digit rent growth as tenants fight for limited space.
The overall construction pipeline grew in more than half of the U.S. markets in Q2, increasing by 7 percent from Q1. Pre-leasing rates also jumped, rising by 370 basis points. And with overall pre-leasing now nearing 50 percent landlords continue to be encouraged by market conditions.
E-commerce and logistics distribution companies have signed more leases in buildings under construction—an indication of a growing sector with a need for new functional warehouse space.
The Q2 construction pipeline jumped in more than half of U.S. markets, increasing by 7 percent overall from Q1 levels.
Leading markets for year-to-date total net absorption (m.s.f.)
But this is not a sign of weakening market conditions. Lower demand is mostly attributed to a lack of quality vacant space and a decline in average transaction size.
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 Research
Vice President, Americas Industrial Research
Manager, Americas Industrial Research