With record levels of new industrial space supply, vacancy rates are on the rise. However, the latest industrial report from CommercialEdge reveals that sales prices are up due to one significant deal, while rent growth is highest in Miami.

Single Bay Area Deal Inflates National Industrial Sales

The U.S. industrial market experienced a decline in both transaction numbers and total sales volume in Q1 2024. Even so, a single, massive biomanufacturing facility sale in the Bay Area skewed national averages to inflate the average sales price by more than 22% compared to Q4 2023.

Specifically, overall U.S. industrial property sales reached $10 billion in Q1 with an average price of $147 per square foot. But, this average was significantly inflated by the Bay Area’s outlier deal, which accounted for 12% of national sales. Without this transaction, the national average sale price would have been $130 per square foot.

The Bay Area deal involved the $1.2 billion purchase of a biomanufacturing facility in Vacaville, Calif., by Lonza Group (formerly owned by Genentech). This single transaction, which commanded a hefty $2,810 per square foot, significantly pushed the Bay Area’s year-to-date average sale price to $777. Meanwhile, fellow West Coast markets Orange County, Calif., and Los Angeles saw averages of $326 and $325 per square foot, respectively, but with lower overall sales volumes.

In total, industrial deals in the Bay Area amounted to $1.68 billion from January to March of this year. Dallas and Chicago followed by securing the second and third positions with $831 million and $585 million in industrial sales, respectively.

Miami Takes Industrial Rent Growth Top Spot

At the same time, the U.S. industrial market maintained its upward trend in rent prices. In March 2024, national in-place rents averaged $7.85 per square foot, reflecting a robust 7.3% year-over-year increase. Notably, new leases signed in the last year commanded a premium by averaging $10.43 per square foot.

However, the biggest story lies in Miami’s rise: After two years of dominance by Inland Empire, Calif., Miami took the top spot for the highest rent growth with an 11.9% year-over-year increase to narrowly surpass Inland Empire’s 11.8% growth.

Not to be outdone, other Southern California markets also saw significant increases. Namely, Los Angeles and Orange County experienced gains of 11.2% and 10.8%, respectively, securing the third and fourth positions.

That said, Miami’s dominance extends beyond growth rate: It currently holds the fourth-highest in-place rents in the U.S. at $11.28 per square foot. Only the pricier markets of Orange County, Calif., ($15.44), Los Angeles ($14.31) and the Bay Area ($13.10) boasted higher average rents.

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