Industrial rent growth performance is likely to experience a distinct performance gap between the top and bottom markets over the next five years, according to a CBRE forecast.
Markets that CBRE expects to outperform between now and 2029 are those that typically lagged during the 2013-2019 and 2021-2023 growth cycles. Prices in the top 15 projected rent growth markets are expected to increase by 5%, while the bottom 15 markets are expected to see gains of less than 2%, according to the firm’s chart of the week. By comparison, the top 15 projected markets for 2025-2029 grew by 10% between 2021 and 2023 and the bottom 15 by about 14% during the period.
The report said asking rents are declining in regional and national distribution hubs that saw significant post-pandemic growth, including Riverside, California.
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“These large hubs typically have complex supply pipelines, as they are targeted by major developers, and are highly sensitive to macroeconomic shifts,” said CBRE. “Many of these markets currently have a large supply overhang following the recent construction boom, which will likely cause their rent growth to underperform in coming years.”
Smaller markets, on the other hand, experienced a less pronounced construction surge in the immediate aftermath of the pandemic, and as a result, they have more balanced supply-demand dynamics and are less sensitive to macroeconomic volatility. As such, these markets should outperform over the next five years, said CBRE.
Such performance variability can be observed across different cycles, according to the report. For example, markets where rent is forecast to increase the most in the coming years, including Charlotte and Omaha, also saw slightly less contraction during the Global Financial Crisis because they are less susceptible to both overbuilding and consumer belt-tightening, said CBRE. Meanwhile, large markets like Miami and Los Angeles performed well during both the 2010s and the pandemic.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
