Supply Chain Disruption, Soaring Rents Present Opportunity for Secondary Markets
August 05, 2021
Houston – The U.S. industrial market continues to prosper during the pandemic, posting 102.2 million square feet of positive net absorption during Q2 2021, the third consecutive quarter occupancy growth exceeded 100 million square feet, according to Transwestern’s second quarter U.S. industrial market report. Markets leading net absorption both in the second quarter and year over year include Atlanta, Chicago, Dallas-Fort Worth and the Inland Empire.
Additionally, the national vacancy rate dropped to 5.2%, its lowest level since the start of the pandemic, helping to drive average rent up to $6.96 per square foot. At midyear, seven out of 44 markets saw vacancy below 4%, including Greensboro, Inland Empire, Los Angeles, Nashville, New Jersey, Orange County (California), Raleigh-Durham and San Jose-Silicon Valley.
“The industrial sector is once again firing on all cylinders, making it increasingly difficult to find suitable space in prime industrial markets,” said Matt Dolly, Research Director at Transwestern. “High rents and supply chain issues are making secondary logistics markets increasingly attractive to occupiers and investors, and we’re closely following markets such as Savannah, Las Vegas, Charleston, Phoenix and San Antonio, all of which have experienced expansionary conditions over a three-year period.”
While new inventory delivered to the market during the second quarter was at its lowest level in more than two years, the 573.7 million square feet currently under construction is 30% higher year over year and double that of year-end 2015. Dallas-Fort Worth, Inland Empire, Atlanta, Phoenix, Chicago and Philadelphia all have more than 20 million square feet underway.
The second quarter saw a slight decrease in the unemployment rate, down to 5.9%, as employers added 1.6 million jobs. However, industrial-using employment was virtually unscathed as supply chain challenges adversely affected manufacturing and construction.
Dolly said, “E-commerce’s share of overall retail sales growth cooled in the second quarter due to the reopening of brick-and-mortar stores, but we expect retailers and food and beverage companies to continue investing in e-commerce, further fueling industrial demand.”
Download the full second quarter 2021 U.S. industrial market report here.
About Transwestern Real Estate Services
Transwestern Real Estate Services (TRS) adds value for investors, owners and occupiers of all commercial property types through a comprehensive perspective and by providing solutions grounded in sound market intelligence. Part of the Transwestern companies, the firm applies a consultative approach to Agency Leasing, Asset Services, Tenant Advisory + Workplace Solutions, Capital Markets, and Research & Investment Analytics.
The privately held Transwestern companies have been delivering a higher level of personalized service and innovative real estate solutions since 1978. Through an integrated, customized approach that begins with good ideas, the firm drives value for clients across commercial real estate services, development, and investment management. Operating from 33 U.S. offices, Transwestern extends its platform capabilities globally through strategic alliance partners whose unique geographic, cultural, and business expertise fuels creative solutions. Learn more at transwestern.com and @Transwestern.