5 Up-and-Coming Industrial Markets to Consider for This Year

The industrial asset class is continuing a white-hot streak in 2021—and a number of emerging markets are gaining popularity as alternatives to more traditional core regions. The following markets command spots five through 10 on Colliers’ recent list of top emerging industrial markets. To read about Colliers’ top five markets, go here. 

Home to more than 27,000 companies and 400 trucking companies, Memphis “pairs competitive lease rates with top-line product quality,” according to Colliers. It also benefits from close proximity to Memphis International Airport, one of the world’s busiest cargo airports, and the International Port of Memphis, the second largest inland port on the Mississippi River and the fifth largest inland port in the US. Industrial vacancy was low in 2020 and ended at 6.2%, and new construction added 6 million square feet of spec inventory to the market. The year also ended with recorded-setting net absorption of more than 11 million square feet, and 17 projects totaling 12 million square feet are slated to be delivered by the third quarter of 2021.  Rental rates grew by 3% last year, and investment sales remained steady with $636 million transacted across 17.7 million square feet. 

Salt Lake City continued to grow this year despite the pandemic, with average overall vacancy increasing to 4.1% from 3.5% the year before. Colliers predicts vacancy will stay low this year, but may go up slightly in spaces larger than 100,000 square feet. About 6.2 million square feet of new space was delivered to the market last year, and positive absorption resulted primarily from large tenants expanding or moving into Utah, led by 3PL (Third Party Logistics).  Asking rents have increased to an overall net weighted average of $6.30 per square foot, causing some tenants to look to longer term leases. 

The port city of Savannah, Georgia has benefited from explosive population growth over the last ten years, and industrial tenants from New Jersey/New York, Los Angeles and Long Beach have all decamped to the #1 seaport in the Southeast region. Vacancy increased to 4.85% at the end of the year and is expected to decrease this year, while overall net absorption hit 4.8 million square feet at year’s end. More than 10 million square feet were under construction at the end of 2020, and average rental rates for modern, Class A space clocked in at $4.86 per square foot.  Cap rates in the region are hovering at 5 to 5.15%. 

Shenandoah Valley, Virginia, a region that has emerged as a cost-effective alternative to Lehigh Valley and Northern Virginia, comes next. The region’s I-81 Corridor industrial market totals 98 million square feet of existing space and saw vacancy drop from 11.3% to 5.1% over the past ten years, according to Colliers. Absorption hit 2.98 million square feet last year, and more than 8 million square feet of space was absorbed in the last three years, outpacing supply. About 2.6 million square feet of new space was delivered in 2020 and an additional 2 million square feet is under construction. And while direct average asking rents are flat at $4.29 per square foot, Class A product rates are holding at $4.75 to $5 per square foot.

Rounding out the top 10 is Stockton/Central Valley, California, which is close to a litany of major highways and multiple ports in Northern California. Vacancy has remained at the low 7% range (down from a peak of 17.7% in 2010), and occupancy gains hit more than 9 million square feet in 2020.  Nearly 15.7 million square feet of new industrial space has been delivered in San Joaquin County since 2016, as well as 11.7 million square feet of build to suit development, and lease rates have begun to perk up in the market thanks to strong demand and a lack of quality space, Colliers says. The region has also seen a shift from small mom and pop landlords to more institutional owners.