Industrial Sales Off Significantly for First Two Months of the Year

The early 2023 numbers through February show a significant drop-off from last year for industrial sales, according to the CommercialEdge National Industrial Report, issued this week.

The $3.9 billion in sales came at an average of $150 per square foot. Last year at this time, sales totaled $9.1 billion.

Deals were done based on strong fundamentals with port markets and inland logistics hubs leading the way.

The Inland Empire’s hefty $855 million volume was tops in the US, followed by New Jersey and Charlotte, where transactions totaled $209 million and $186 million, respectively.

Western markets, especially Orange County, remained the most expensive in the country. The OC’s average rent was $13.20 per square foot, followed by Los Angeles’ $12.39 and the Bay Area’s $12.24 per square foot. Overall, Central Valley ($5.74) was the only region in the West to record in-place rents below the $7.12 national figure.

Record levels of containers being handled at the ports of Los Angeles and Long Beach are to thank.

Phoenix Remains Hot

Elsewhere out west, CommercialEdge reported that Phoenix had maintained its position as a prominent industrial market. The report called it one of the hottest for industrial development, with 54.1 million square feet under construction as of February, representing 15.6% of the local stock.

Manufacturing alone accounted for 12.5 million square feet of total space underway, though much of that will be owner-occupied, according to the report. Denver had the second-largest pipeline in the region.

The Inland Empire’s low vacancies and substantial rent growth made it an attractive market for investors. The Inland Empire accounts for more than one-fifth of all sales volume nationwide, according to CommercialEdge.

Not Much Space Available in the Midwest

In the Midwest, there was not much available space to lease. Columbus recorded the lowest industrial office vacancy rate nationwide, with a rate of just 1.1%. Indianapolis had the second-lowest vacancy rate in the region and the fourth-lowest in the country at 2.5%, outpacing Los Angeles and its 2.6% rate.

That was there were some of the least expensive rents among the country’s leading markets. Columbus was home to the lowest lease rate at just $4.14 per square foot, Indianapolis had the second lowest at $4.34 per square foot, followed by St. Louis at $4.36.

Atlanta and Miami also posted low vacancy rates in February, with both markets coming in at 2.7%. Nashville’s was 2.9% vacancy rate, well below the 3.9% national average. Houston had the highest vacancy rate nationwide at 7.6%.

In the Northeast, New Jersey joined the tight port markets with a vacancy rate of 2.8% and Boston recorded the highest rent growth in the Northeast and the third highest nationwide, surging 10.7% over the past 12 months.