Industrial Developers Meet Construction Challenges

As sites become scarce, project developers are turning to alternative strategies, according to the latest industry report from CommercialEdge.

The industrial sector is bracing for headwinds as demand continues to outstrip supply for new industrial space. This is prevalent in areas such as Southern California, where geography limits the amount of land available for development. So developers are turning to new ways to solve this problem, such as multi-storey industrial buildings – common in Asia, but at limited cost – outdoor storage facilities, or the conversion of old offices and retail spaces to the retail in industrials, according to the latest report. business advantage monthly industrial report.

READ ALSO: How migration trends affect industrial and office real estate

Some 667.5 million square feet of industrial space was under construction across the country at the end of June, representing 3.8% of total stock. According to CommercialEdge, 159.6 million square feet of industrial space was completed in the first half of 2022, with Dallas delivering the most inventory (15.9 million square feet), followed by Indianapolis (7.9 million) and Phoenix (7.7 million).

In June, the markets with the largest pipelines as a percentage of existing inventory were Phoenix (43.8 million square feet under construction, 15.2% of inventory) and Indianapolis (24.1 million, 7.6%), a central logistics center with access to interstate highways and the world’s second largest FedEx hub. June year-to-date trading volume was $39.6 billion, with industrial assets trading at an average of $138 per square foot, a 31.3% increase from the same period last year.

Average incumbent rents rise amid falling vacancy

National in-place rents for industrial space averaged $6.57 per square foot in June. Average rents rose 490 basis points year over year and four cents more than in May. Rent growth over the past 12 months has been driven by tight supply markets in Southern California, such as the Inland Empire (up 7.4%), Los Angeles (6.8 %) and Orange County (6.5%). Detroit followed suit with a 6.4% increase, thanks to its status as a cross-border shipping point between the United States and Canada.

Nationally, industrial market vacancy reached 4.6% in June, down 10 basis points from the previous month. The markets with the tightest vacancies were the Inland Empire (0.6%), Columbus (1.4%) and Los Angeles (1.9%).

Read the full report from CommercialEdge.