by Josh Bays, on Feb 21, 2018 11:26:27 AM
One of the biggest challenges companies face when expanding their distribution footprint is the lack of available real estate product in favorable locations. Site Selection Group, a full-service location advisory, real estate and economic incentive services firm, monitors industrial activity in the United States. Over the past few years, warehouse inventory has diminished as corporate expansions outpace construction.
National industrial vacancy rates have been steadily declining
In the short period from 2008-2010 when the Great Recession was in full swing, national industrial vacancy rates peaked at close to 14%. Since then, rates have steadily declined and currently sit close to 7%. The following chart shows national industrial vacancy rates.
National construction starts and deliveries have been steadily increasing
Over the last five years, national construction starts and deliveries steadily increased on an annual basis, but construction starts appear to have peaked at the end of 2016. Although deliveries are expected to keep pace for the near future, the constrained industrial real estate market will likely further tighten as deliveries taper off. The following chart shows national construction starts and deliveries by quarter.
Construction activity is still active in the large population centers
Although industrial construction activity appears to be slowing on a national scale, there are still several very active markets. Construction activity seems to be correlated to high population centers to reduce delivery times to customers as the bulk of large industrial leases are e-commerce or retail fulfillment related. The following interactive map shows the 40 markets with highest construction activity, and is shaded by average rental rates.
Top 20 industrial leases of Q4 2017
The following chart shoes the largest industrial leases in the United States during the fourth quarter of 2017. Interestingly, the most active construction market, Dallas-Fort Worth, did not land one of these projects.
| Building | Market | SF | Tenant Name |
|---|---|---|---|
| 171 River Road | Northern New Jersey | 725,400 | Best Buy |
| 2203 Sherrill Dr* | Charlotte | 639,000 | Geodis |
| 3282 E Holmes Rd | Memphis | 615,000 | Amazon.com |
| 2027 Harpers Way* | Los Angeles | 559,000 | Virco |
| LogistiCenter at Las Vegas Boulevard | Las Vegas | 546,480 | LogistiCenter at Las Vegas Boulevard |
| Prologis Ports | Northern New Jersey | 540,000 | Allied Beverage Group |
| Chino South Business Park - Bldg 8 | Inland Empire (California) | 534,390 | NFI |
| Midland Logistics Center | Atlanta | 505,000 | S&S Activewear |
| ProLogis Park Cranbury S - Bldg 2 | Northern New Jersey | 504,428 | Home Depot |
| 50-02 55th Ave | Long Island (New York) | 475,000 | UPS |
| 3680 Langley Dr | Cincinnati | 423,608 | First Group Logistics |
| Atlas Industrial Park - 153 Gibbons Rd* | Greenville/Spartanburg | 422,000 | The Recon Group |
| Location Optimization Ctr - LOC 8 | Northern New Jersey | 410,300 | LG Electronics USA |
| Camp Creek 3201 | Atlanta | 404,700 | CEVA Logistics |
| Mason Ranch Bldg 1 | Houston | 373,860 | Rooms To Go |
| 3910 Alto Ave | Las Vegas | 338,520 | Lincoln Industrial Co. |
| 9801 Blue Grass Rd | Philadelphia | 332,640 | Dependable Distribution Service LLC |
| PARK130 - Bldg 1 | Northern New Jersey | 320,867 | Rema Foods |
| Edwards Dr | Indianapolis | 320,000 | Ken's Foods |
| 1042 Fred White Blvd | Nashville | 312,000 | Sumitomo Tires |
| Source: CoStar *Renewal |