- Industrial construction starts reached 97.8 MSF in 1H24, down from 147 MSF a year ago.
- In-place rents rose by 7.5% YoY to $8.04 PSF as the national vacancy rate edged up to 6.1%.
- SoCal is the most in-demand region, with Orange County topping the market at $15.69 PSF.
- The Midwest saw slower rent growth, with Kansas City in last place with 2.5% growth.
- DFW’s industrial market may slow down after years of growth, but due to continued immigration and nearshoring, remains poised for future expansion.
According to CommercialEdge’s July 2024 National Industrial Market Report, U.S. industrial construction slowed down significantly in 1H24. As reported in Globest, only 97.8 MSF of industrial space began construction, down from 147 MSF last year.
Several factors contributed to this national decline in industrial construction starts, including normalizing tenant demand, high levels of new supply, higher construction loan costs, and economic uncertainty.
Bigger Picture
Despite this slowdown, industrial deliveries in 1H24 reached 209 MSF, up from 160 MSF in the same period in 2023. This indicates the market’s capacity to complete existing projects even as new starts decline.
In 2023, industrial construction starts fell to 357.5 MSF, plummeting from the 1.1 BSF that started between 2021 and 2022.
The national industrial vacancy rate rose to 6.1% in June 2024 from 5.6% in the previous month. In-place rents, however, rose by 7.5% YoY, reaching $8.04 PSF.
Regional Insights
- Southern California is still the most in-demand region for industrial, driven by the ports of LA and Long Beach. Orange County stands out as the priciest industrial market, with average in-place rents of $15.69 PSF in June.
- The Midwest revealed slower rent growth due to fewer supply constraints. Kansas City, St. Louis, Detroit, and Chicago all reported modest YoY in-place rent gains.
- Despite leading the South in industrial development, DFW starts may slow down after several record years of growth. However, ongoing immigration and nearshoring trends, with over 43 MSF currently in planning, point to a positive outlook for the region.
What’s Next
Looking ahead, reshoring is also expected to support the industrial sector. Notably, manufacturing accounted for 16.1% of all YTD industrial starts, up from 13% in the previous two years and significantly higher than the 7% to 8% range recorded in 2018 and 2021.
