Despite the ongoing challenges faced by most real estate sectors, industrial markets across the country continue to perform well, driven largely by the reliance on e-commerce. In January, rents averaged $6.44 per square foot, marking a 5.1 percent increase over 12 months. New leases during the same period commanded a premium, averaging $7.50 per square foot.
CommercialEdge anticipates that last year’s shift toward e-commerce, while unprecedented, likely points to a structural change in consumer behavior, with the subsequent demand expected to remain, even if growth moderates in 2021. Other factors, including recovering international trade, will place additional upward pressure on rent growth.
Industrial vacancy fell to 6 percent nationwide in January. While developments underway totaled more than 330 million square feet—a record level—elevated absorption is likely to lead to a further vacancy compression in most markets, despite the 27.8 million square feet already delivered this year.
As rents have grown, so too has transaction volume: $2.2 billion in industrial sales closed in January alone, following a record of nearly $12 billion in the fourth quarter of 2020. Sales prices averaged $145 per square foot in January, with the highest price points in New Jersey ($274 per square foot), Seattle ($233 per square foot) and Los Angeles ($218 per square foot).
The Inland Empire led all markets both in terms of vacancy (2.5 percent) and rent growth, clocking in at 8.1 percent year-over-year through January. With both the Port of Los Angeles and the Port of Long Beach closing out the year with record activity driving up demand, expect rapid rent growth to continue.