LA, Inland Empire Lead the Way in Industrial Rent Increases
Rent premiums are also high in the Northeast, with New Jersey leases costing 37% more than the national average.
Industrial rent growth has surged while vacancies plunged over the past year in coastal markets, with the Inland Empire and Los Angeles leading the way.
Fueled by record activity at the Port of Los Angeles, demand for industrial space is at an all-time high in Southern California, according to a new report from Yardi Matrix. The Inland Empire saw rent grow by 7.1% over the last 12 months, while LA posted an increase of 6.7% over the same period. Vacancies clocked in at 2% for the IE in May, and research from JLL released earlier this year shows that the market recorded an impressive 26 million square feet of absorption in 2020.
Rent premiums are also high in the Northeast, with New Jersey leases signed over the last year costing 37% more than the national average. Same goes for Boston, where new leases are 33% more expensive. The rest of the markets with the highest spreads are along the West Coast, with the Inland Empire at 24% ($1.47), Seattle at 20% ($1.74) and Los Angeles at 18% ($1.76), according to Yardi.
While coastal markets are surging, Midwestern cities are suffering, with rent growth at -1.8% in St. Louis, -0.5% in Detroit and 0.7% in Kansas City. Nashville is the exception to the coastal-is-king maxim, with new leases signed in the last year costing about 33% more than the national average.
“Remarkably, the two Missouri markets have vacancy rates below 5%, but that has not translated to rent growth, since it is easy for developers to add new space in these markets to meet the increased level of demand,” the report notes.
The national average rent for industrial space came in at $6.59 in May, up 4.4% year-over-year, while the average vacancy rate was 5.7%.