Industrial real estate market leaps to new heights, Transwestern report finds

The U.S. industrial real estate market set new records in the third quarter, posting the largest quarterly growth jump since 2008 with net absorption of 158.8 million square feet, Transwestern Real Estate Services said.

By another measure, the last four quarters together marked the first time in history that occupancy has increased by more than 500 million square feet year over year, with a high-water line of 540 million square feet of net absorption, the Houston-based firm said in its quarterly U.S. Industrial Market report. 

That report predominately includes property types including warehouses, distribution centers, truck terminals, food processing, manufacturing, cold storage, and flex buildings.

Those sectors also combined to set a record for the first time the average asking rent for industrial space in the U.S. surpassed $7.00 per square foot. Asking rents increased to $7.11 per square foot in the third quarter—from $6.98 the previous quarter—with more than one-third of the 44 tracked markets reporting double-digit percentage growth year over year.

Looking toward the end of the year, that hot growth could be cooled by the well-publicized supply chain delays and product shortages that are making many items hard to find, Transwestern’s research director Matthew Dolly said in a release.

“The fourth quarter will further test the resiliency of the industrial sector, as ongoing supply chain issues will be exasperated during what is anticipated to be a strong holiday spending season, and could slow new and in-progress industrial projects,” Dolly said. “It is likely that e-commerce activity will only intensify over the coming quarters, increasing the attractiveness of properties in regions that have traditionally been considered secondary industrial markets.” 

But the market could steamroll those issues thanks to its powerful momentum. There is currently 636.6 million square feet of industrial space under construction nationally, nearly double the volume five years ago. Approximately 27% of that space is concentrated in six markets: Dallas, Phoenix, Atlanta, the Inland Empire, Chicago, and Philadelphia. When measured as a percentage of existing stock, the construction pipeline signals future expansion heavily concentrated in the Sunbelt, Transwestern found.

The #industrial market makes history as Q3 saw the most significant quarterly growth since 2008 with net absorption of 158.8 MSF.

Check out our third quarter national Industrial Market Report here: https://t.co/0WkT00ZkUl#CRE #research #realestate pic.twitter.com/VRJ4SvfJmV

— Transwestern (@Transwestern) November 16, 2021