US industrial rents have grown significantly this year, despite—or perhaps driven by—the global coronavirus pandemic. According to the Winter 2020 US industrial and logistics report from Colliers International, US industrial rents have increased 5.6% year-over-year. Industrial rents continued to gain steam in the third quarter, increasing 2.6% quarter-over-quarter to $7.21 per square foot.
Although industrial assets have seen tremendous demand this year due to an increase in online shopping during the pandemic, Colliers attributes the rent growth to a large influx of new industrial supply, specifically modern distribution facilities. At the end of the third quarter, the US construction pipeline totaled 328 million square feet, including 75 mega-facilities, which total 1 million square feet or more.
Each of the top 25 US industrial markets experienced rent growth in the third quarter. Three markets—Dallas-Fort Worth, Detroit and Philadelphia—had significant rent growth, exceeding 10%. Dallas-Fort Worth is the only market where new construction activity aligned with rent growth. The market was at the top of both lists, and currently has more than 20 million square feet under construction. Although Detroit and Philadelphia both have construction pipeline that well exceed the national average.
Eight of the top markets posted asking rents exceeding the national average, and San Francisco Bay area, the New York City Metro area and the Washington, D.C. markets had the highest average asking rents in the country, exceeding $10 per square foot.
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Construction activity is also up in most markets. Seven of the top 25 markets have more than a 50% year-over-year increase in construction activity, led by Denver. The Colorado city has more than doubled its pipeline over the year. The construction includes a the speculative 594,000-square-foot warehouse at Stafford Logistics Center in Aurora, CO from NorthPoint Development.
Industrial development has continued to forge ahead through the pandemic, and the demand for warehouse space has encouraged investors to keep building. Logistics Property Co. has closed its LPC Logistics Venture One industrial-to-core fund with $1 billion in capital commitments. The fund will focus on developing ground-up industrial properties in the US. The fund is already 90% allocated with projects in Atlanta, Chicago, Dallas, Houston, Seattle and Pocono, Pennsylvania, many of the top development markets noted in the report.
Duke Realty has continued to expand its pipeline this year as well. The developer has active projects in Chicago, San Francisco, Seattle, Atlanta, New Jersey and South Florida, and 3.1 million square feet under construction in Southern California along. That includes a 1.2 million square foot industrial facility that broke ground this month.