Rents Up, Vacancy Rates Down As The US Industrial Market Continues To Soar

Industrial real estate continues to exhibit unprecedented growth as we power through the second half of the year, and industry leaders see e-commerce growth and supply chain modernization as key drivers.

According to a recent Colliers International report, the demand for big-box industrial space is on the rise. Of the 1,908 buildings documented in the six core industrial markets—which include Atlanta, Chicago, Dallas-Fort Worth and the greater Los Angeles area—only 157 are vacant. Leasing of industrial space increased year-over-year by 10.7% the first half of 2016, and high demand boosted rents 13.1% to $4.77/SF.

“We haven’t seen the level of activity going on recently ever before,” Colliers national director of industrial research James Breeze (above) tells Bisnow. The modernization of the supply chain has created new demand, and he expects the pace to continue as long as e-commerce sales keep growing.

The trend is picking up steam now that brick-and-mortar retailers are attempting to improve their online presence to keep pace with e-commerce giants like Amazon. “E-commerce sales are growing at a pace five times faster than retail. Online is how Millennials prefer to buy things and retailers need to be ready for this,” James says.

With consumers’ insatiable appetites and even larger expectations when it comes to the purchase and delivery of merchandise, state-of-the-art facilities are in high demand. Retailers are consolidating their supply chains, James tells us, to be more cost-efficient and moving into distribution centers that can handle e-commerce.

“Retailers need more modern buildings for order sorting, and more land and build-out for parking spaces,” he says. “Modern distribution centers have more employees at a much higher rate.”