CHICAGO—The industrial real estate sector has been gathering strength for some time, but many professionals throughout the US say a tipping point has been reached and the robust activity long seen in core markets has now spread to smaller cities.  

The Chicago-based CCIM Institute just published its latest quarterly market trends report and about 69% of CCIM members surveyed, most of whom work in markets with populations between 1 million and 5 million, reported a higher industrial deal flow year over year.

"We have seen an increase every single year since the recession, and this year has been no different," Russ Webb, a managing partner at Silver Oak Commercial Realty in Southlake, TX, tells GlobeSt.com.

“I would characterize our industrial leasing market as hot,” adds Brian Young, a managing broker at Cushman & Wakefield/Thalhimer in Greenville, SC. “We have already seen over 4 million square feet announced in new deals in 2015, and there are several large users out in the market now that will sign this year.”

The CCIM members surveyed also reported a closing rate of 94% on industrial transactions, and a 100% closing rate for industrial leases, with higher rents in 67% of closed industrial leases.

That high closing rate does not come as a surprise to Webb. "There is not enough inventory in the Dallas area," he says, and with such intense competition, buyers are strongly motivated to get deals across the finish line. "To go and find another property is very difficult." 

The survey also found that large institutional investors that are scouring smaller markets for better yield. “Every other week we have an institutional investor coming to town wanting to talk about investment opportunities,” says Joseph Orscheln, vice president, industrial properties at CBRE in Kansas City. “Unfortunately, we just don't have a lot to present to them. If there were, there would be great competition for those opportunities.”

Furthermore, CCIM members gave the industrial property segment a 3.2 out of 5.0 investment value vs. price ratio, the highest rating of any of the major property segments. In terms of property segment investment conditions, industrial rated 3.7 out of 5.0, just below multifamily, which received a 4.0 rating.

CCIMs rated their regional economic business climates 3.8 out of 5.0, and gave the national economic rate 3.4 out of 5.0. Both averages surpass last year's third-quarter ratings of 3.7 for regional and 3.1 for national economic conditions.

Webb sees his region as firing on all cylinders. "Rents are starting to climb and we've got a lot of new development coming in, including large distribution buildings. For Dallas-Fort Worth, we expect to continue seeing a spike in activity."