By Lynn Pollack Globest.com
The US industrial market continues its wild upward swing after a banner 2020, a year in which it fared better than any other CRE segment. Overall, the country has experienced 43 consecutive quarters of positive industrial absorption, with occupancy gains the third highest on record last year. And while core markets have continued to gain popularity, opportunities for both investors and occupiers are increasingly popping up in secondary emerging regions.
Austin leads the way in emerging markets, with overall vacancy coming in at 7.3% at the end of last year, down from 8.6% in 2019, and occupancy gains of 2.3 million square feet, led by big leases by FedEx and Amazon. The average industrial asking rate was $10.70 at year’s end. More than five million square feet of industrial space was also underway in the region at year’s end to meet rising e-commerce and manufacturing demand, with the high-profile NorthPark356 and Plum Creek Industrial Center set to deliver in a few years. E-commerce continues to pick up traction in Austin and predicts demand will likely outpace supply well into this year.
Next up is Columbus, the second largest city in the Midwest and the 14th largest in the US. The city is located within a 10-hour drive of 46% of the nation’s population and is a “true multimodal logistics hub.” With record-breaking development, net absorption, and investment sales activity. Vacancy has decreased continuously over the last decade, from 10.2% in 2010 to 4.7% in 2020, and the vacancy rate is expected to decrease further this year as new product is leased up. The city saw the highest net absorption on record last year at 10.7 million square feet, and more than 12 million square feet of new construction was delivered. Asking net rents are $3.89 per square foot, with total sales volume at $1.2 billion last year.
Indianapolis “is no longer the hidden gem” of industrial, Colliers said, as behemoths like Amazon doubled its local footprint and Walmart broke ground on a 2.2. million square foot build-to-suit distribution center in 2020. Developers in the Circle City delivered a record 14.3 million square feet of new space, thanks in part to business-friendly state tax policies and ample local government incentives. Vacancy hit 6.1% at the end of 2020, a jump from 4.4% in Q1 2019, but last year’s figure is “deceptive,” according to Colliers, because it doesn’t factor into account more than 3 million square feet of signed leases that had yet to commence when data was collected. If those planned occupancies are factored in, the firm says, vacancy drops to 4.8%. The city also experienced two consecutive years of overall net absorption in excess of 10 million square feet, with 2021 predicted to break that record again, and the average rental rate has gone up by 9% over the last two years.
Big box facilities were the highlight for Las Vegas in 2020. The city has benefited from a new I-10 interstate corridor linking Las Vegas and Phoenix, and its proximity to Los Angeles and Long Beach makes it attractive for western distribution facilities. Industrial vacancy hit a low of 3.2% in the region in 2019 and rose to 6% by the end of last year, thanks largely to a rapid increase in stock over the past three years. Net absorption totaled 5.7 million square feet and included a new 616,000-square foot Amazon expansion in the Vegas suburb of Henderson. The city posted 18.7 million square feet of industrial construction in 2020, with another 5.3 million square feet underway, and rents have remained stable over the past year. Sales were lower than expected, Colliers said, as the pandemic “pushed investors to the sidelines.”
Rounding out the top 5 emerging markets is Lehigh Valley, Pennsylvania, home to major manufacturing companies like Nestle Purina, Mack Trucks and Victaulic. The vacancy rate for the region increased to 6.8% in 2020 with 5.6 million square feet of spec construction delivered, and occupancy gains dropped 2.5% from the end of 2019, totaling 4 million square feet. Demand continues to drive development in all size ranges. With activity picking up the most steam in larger big-box speculative spaces larger than 500,000 square feet. Rents increased by 9% last year, though sales activity was constrained by supply constraints.
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