Although the industrial sector hit a speed bump in the first half of 2020 due to COVID-19, strong demand for industrial space continues to drive robust development, investment and leasing activity nationally, according to Transwestern. The national real estate services firm tracks 11 growth markets across the U.S. dubbed the “Elite 11”. These markets are preferred locations for big-box distribution users and/or areas in high demand by logistics and manufacturing companies.
Growth indicators for the Elite 11 are based primarily on rent acceleration, space absorption and pace of development relative to the size of each market, according to Transwestern.
The Elite 11 markets are (in alphabetical order):
1. Atlanta
2. Chicago
3. Dallas/Fort Worth
4. Houston
5. Lehigh Valley, Pa.
6. New Jersey
7. Northern California
8. Seattle
9. South Florida
10. Southern California
11. Washington D.C./Baltimore
On a national basis, the average asking rent was $6.56 per sf at the end of 1H20, according to Transwestern. The firm predicts that rent growth may slow a bit nationally as global economies wrestle with the pandemic.
“Demand in primary markets, fueled by a tidal wave of unanticipated ecommerce activity – most notably online grocery shopping – will buttress the industrial sector for the foreseeable future,” the firm noted.
Seven of Elite 11 markets came in above the U.S. average rent growth of 3.9%, Transwestern reported. Dallas/Fort Worth, New Jersey, Washington-Baltimore and Lehigh Valley all exceeding 5%.
- Texas regions continued to grow at the fastest rate, led by Houston, the only market to expand by more than 4.0% during the past 12 months.
- Large users drove new leasing activity in Dallas-Fort Worth, which led all markets in YoY net absorption and rent acceleration.
- The average asking rent in New Jersey busted through the $9.00 PSF NNN barrier in 2020, increasing by nearly 70%since the previous recession.
- Atlanta will very likely set a record for total SF delivered annually by the end of 2020, with 20 MSF under construction and 10 MSF already delivered this year.
· Product under construction in the Lehigh Valley market is at an all-time high, and its pace of future development is more than double that of all other Elite 11 regions.
As a result of COVID-19, it is anticipated that developers will remain cautious in the short term, while favoring U.S. population centers, boding well for the Elite 11 markets.
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