Port Markets Nab Biggest Industrial Rent Increases
New leases in New Jersey cost on average $2.60 more per square foot than in-place leases.
Port markets commanded the biggest industrial rent increases in September, with New Jersey, the Inland Empire and Nashville all posting upticks of more than 6% year-over-year.
Overall, the average asking rent across the top 30 US markets surveyed last month by CommercialEdge came in at $6.35 per square foot, an increase of 3.5% year-over-year but flat from the previous month but unchanged compared to the previous month. But in port markets, the increase was nearly double. New Jersey led with the largest increase at 6.4% over the last year, followed by Southern California’s Inland Empire at 6.1% and Nashville at 6%.
Port markets also commanded rent premiums, according to CommercialEdge, with new leases in New Jersey costing on average $2.60 more per square foot than in-place leases. Boston’s lease spreads followed behind at $2.53 per square foot.
Availability of space in industrial port markets and regional logistical hubs also remained low as supply chain issues continue to plague retailers. Nationally, vacancy across the top 30 US industrial markets dropped 20 basis points month-over-month to 5.7%, but the number was considerably smaller in certain in-demand locations. The Inland Empire’s vacancy rate in September was 1.1%, and while the region isn’t itself a port market it takes on a “significant portion” of shipping volume from the nearby ports of Los Angeles and Long Beach. Research from JLL shows that the Inland Empire market recorded 26 million square feet of absorption last year alone.
Vacancy was also tight last month in the landlocked hubs of Indianapolis (2.3%), Columbus (2.4%), and Kansas City (3.4%).
More than 7 million square feet of industrial space was under construction in September, totaling 6.3% of stock. Dallas-Fort Worth has the most new supply planned, with 36.5 million square feet currently under construction, followed by Phoenix and Chicago.
CommercialEdge estimates yearly delivery volumes of at least 350 million square feet through 2026. That comports closely with recent estimates from YardiMatrix which call for an annual increase in total industrial stock of between 2 and 2.3% over the next five years, netting between 350 and 370 million square feet of new space each year for a total of 1.8 billion square feet of new stock.