Dallas Leads National Industrial Development for 3rd Year in a Row
Industrial real estate development continues to see sustained growth despite concerns of potential supply saturation. According to commercial real estate research platform CommercialEdge, more than 690 million square feet of industrial supply is under construction nationally. That’s up from last year’s previous all-time high of 592 million square feet, so industrial development is still accelerating with positive indicators such as higher last-year leases compared to in-place leases as well as record low vacancies.
This outlook highlights the potential of another strong year for industrial development, even if demand starts to normalize due to economic headwinds. So, to identify the markets experiencing the most demand and supply, we ranked all industrial markets based on square footage currently under construction. For further context, we also identified which industrial real estate subtypes generated the most new developments, as well as the largest properties scheduled to be completed this year.
Key Takeways
- Dallas has the most industrial space in the pipeline for the third year in a row with 61.6 million square feet under construction.
- The 52.5 million square feet of industrial space under construction in Phoenix represents more than 15% of the market’s current stock.
- Amazon’s Project Schooner warehouse in Johnston, R.I., is the largest projected development this year, totaling 3.86 million square feet.
- Last year’s largest completion was Giga Texas, a 4.3-million-square-foot EV manufacturing facility.
145MSF of Industrial Space Under Construction in Dallas, Phoenix & Inland Empire
For the third year in a row, the high-demand Dallas market is poised to deliver the most industrial space nationally. Specifically, the 61.6 million square feet of space in the pipeline represents a 60% increase compared to last year’s 38 million, as well as a sizable 7.1% of the market’s current stock. Between logistics, manufacturing and specialized asset types, industrial development in the Metroplex is poised to keep chugging along for another year to meet the sustained demand.
At #2, Phoenix is expected to deliver around 52.5 million square feet of industrial space. This marks a further acceleration in the metro’s rapid industrial expansion as the new deliveries will supplement the Valley of the Sun’s industrial inventory by a whopping 15.3%. Furthermore, the city’s status as a regional logistics hub — in addition to spillover demand from southern California and the popularity of build-to-suit warehouses — means that the new supply is likely to be occupied with steadily climbing rents and vacancies around 3.2%.
Besides the two top entries, the only other markets where the pipeline represents more than 5% of current stock are Charlotte, N.C. (15.8 million square feet for 5.3%) and Denver (12.8 million square feet for 5.1%).
Meanwhile, in South California, Inland Empire’s 30 million square feet currently in the works highlights it as the third-most active market for industrial construction. But, with vacancies in the area as low as 1.7%, these new developments are unlikely to satisfy the appetite for the highly competitive South California market, especially considering that it will only boost the market’s 300-million-square-foot inventory by 4.9%.
Chicago has 26.9 million square feet of industrial space in the works — the fourth-most nationally. However, the Chicago industrial market is less pressed for space than the previously mentioned entries, featuring a much more generous current stock, as well as vacancies around 5.8%.
At the same time, some markets did witness decreases in square footage under construction compared to last year. For example, Indianapolis had just under 27 million square feet of industrial space across 64 properties under construction at the beginning of 2022. Now, that figure is 15.7 million across fewer than 40 properties, thereby demonstrating a slowdown in new industrial developments.
The bottom line is that the record-setting industrial development that’s currently ongoing is still reliant on massive logistical facilities primarily operated by e-commerce companies in key markets, with the low vacancies in these competitive markets continuing to drive development of both single- and multi-tenant industrial properties.
Amazon Continues Delivering Giant Logistics Facilities, Though Conditions May Change
The explosive growth experienced by e-commerce companies at the beginning of the pandemic generated a wave of build-to-suit warehouses and logistical centers to pop up across the nation, propping up deliveries, while also contributing to rising industrial construction costs. This year, the retail giant is expected to take up the majority of the top 10 largest deliveries list, although a switch in strategy could mean that multimillion-square-foot facilities give way to other types of industrial properties.
Among Amazon’s six properties of the 10 largest scheduled to be delivered this year, the largest is the development in Johnston, R.I. After initially being planned to open late last year, the completion date for the industrial property dubbed Project Schooner has been pushed back to Q3 2023. The facility which began work in late 2021 will total over 3.86 million square feet of industrial space, being another in a series of mammoth distribution and fulfilment centers started by the company in 2020 and 2021.
Similarly, the e-commerce giant is also behind a facility in Woodburn, Oreg., known as Project Basie broke ground in late 2021. Expected to be just 15,000 square feet smaller than Project Schooner, the Woodburn warehouse will bring approximately 1,500 jobs to the area according to Amazon.
In addition to these facilities, Amazon is also the owner or tenant of four other of the 10 largest properties in the pipeline for this year, with locations ranging from Rhode Island and Massachusetts to Louisiana. However, this wave of massive distribution centers could soon slow. In Q2 2022, Amazon announced plans to scale back its real estate development and acquisition amid slowing growth.
While this could mean fewer large properties being delivered (all 10 of the largest industrial properties completed back in 2021 were Amazon facilities), this change in policy could also have the secondary effect of freeing up construction materials and expertise for other e-commerce operators, as well as other companies that held back on logistical expansion due to unaffordability.
Other than Amazon’s distribution centers, the list of largest completions slated for this year also includes the Live Oak Logistics Center, a Class-A industrial park in Pooler, Ga. It came in at #5 with 3.5 million square feet of industrial space across four buildings. Meanwhile, multi-tenant properties had two other representatives on the list — the 2.8-million-square-foot Commerce 500, a joint venture between Hillwood and NASCAR; and the construction of Buildings 3A and 3B of the Georgia International Trade Center, which are scheduled to hit the market this quarter.
Notably, a manufacturing facility also made the list: Totaling 2.85 million square feet of space, Phase 2 of Lucid Motors’ production plant in Casa Grande, Ariz., is expected to be 2023’s 7th-largest industrial delivery. The electric vehicle maker started rolling out its first EVs in 2021. Now, it’s aiming to scale up its production capabilities with an expansion of its initial facility.
To that end, another EV manufacturing plant was 2022’s largest completion — Tesla’s new Austin facility dubbed Giga Texas. Totaling almost 4.3 million square feet of space, the plant had its full opening in April after producing vehicles in a limited capacity since late 2021. Along the same lines, a battery manufacturing facility operated by GM made #7 that year, totaling 2.8 million square feet of space.
Aside from these manufacturing properties, last year’s largest industrial deliveries were exclusively distribution centers. Of these, all but one were operated by Amazon and being developed-to-suit for the e-commerce company by Hillwood and USAA. The sole exception was a Walmart warehouse totaling almost 2.8 million square feet that reached #8.
| Market | Under Construction (SqFt) | Under Construction % of Stock | UC + Planned % of Stock |
|---|---|---|---|
| National | 691M | 3.8% | 7.7% |
| Dallas | 62M | 7.1% | 12.8% |
| Phoenix | 52M | 15.3% | 34.1% |
| Inland Empire | 30M | 4.9% | 9.7% |
| Chicago | 27M | 2.7% | 6.5% |
| Houston | 23M | 4.1% | 7.1% |
| Philadelphia | 20M | 4.8% | 12.6% |
| Charlotte | 15.8M | 5.3% | 11.9% |
| Indianapolis | 15.7M | 4.6% | 10.3% |
| Columbus | 13M | 4.5% | 7.1% |
| Denver | 12.8M | 5.1% | 8.3% |
| New Jersey | 11M | 2.0% | 4.2% |
| Kansas City | 10.6M | 4% | 16.7% |
| Detroit | 10.5M | 1.9% | 2.9% |
| Seattle | 10M | 3.5% | 6.2% |
| Central Valley | 9.4M | 2.8% | 4.1% |
| Atlanta | 9.2M | 1.7% | 3.5% |
| Cincinnati | 8.7M | 3.2% | 4.5% |
| Tampa | 6.7M | 3.1% | 9.3% |
| Boston | 6.6M | 2.8% | 3.8% |
| Bay Area | 6.3M | 2.2% | 4.4% |
| Nashville | 6.2M | 3.1% | 4.9% |
| Saint Paul | 5.3M | 1.6% | 4.0% |
| Memphis | 4.6M | 1.6% | 4.2% |
| Baltimore | 4M | 1.9% | 3.7% |
| Los Angeles | 3.6M | 0.5% | 2.2% |
| Cleveland | 3.4M | 0.9% | 2.3% |
| Bridgeport | 1.8M | 0.9% | 2.4% |
| Portland | 1.7M | 0.9% | 2.7% |
| Orange County | 758K | 0.4% | 0.8% |
Methodology
All data on markets and individual properties is courtesy of CommercialEdge and was extracted on February 10, 2023. Only industrial properties larger than 25,000 square feet were included. For mixed-use properties, this includes other commercial real estate types, including office, retail and multifamily space.
In the case of campus properties, the square footage displayed is the sum of all projects under construction on the same campus, regardless of completion date in the same year.