As investors look to secondary industrial markets to improve yields derived from rent growth, demand still remains in many of the major markets — retailers and etailers alike are still outfitting their supply chains in 2017. And although 3PL and logistics/distribution demand is driving the market, there has been a bump in activity this year for flex R&D and creative-office conversions (both of which utilize some form of industrial space).
Tracing the geographies of demand is an illustrative way to understand asset-cycle flows. CRE Scoops reached out to commercial real estate services CBRE for year-to-date industrial net absorption figures, seeking to answer the question, “which U.S. markets have been hungriest for industrial space this year?”
Data on vacancy and tenant-improvement trends from the first-quarter 2017 Industrial Outlook Data, produced by commercial real estate brokerage JLL, also proved helpful in illuminating how the asset class is pacing this year. Without further ado, here are the 20 fastest-growing industrial markets in 2017.
So far this year, Denver has experienced 521,000 sq. ft. of net absorption for industrial assets, according to research data provided by CBRE. Although over half a million square feet is a solid figure for activity, Denver still places at #20 when compared to the roll of other markets in this list.
JLL forecasts Denver’s total industrial vacancy for 2017 as 4.4%. Net absorption is outpacing deliveries year-to-date. However, the firm says tenant improvements (changes written into the lease that the building owner must make for to satisfy tenants) are rising.
Year-to-date, Hartford has absorbed 669,000 sq. ft. of space, CBRE says.
Sacramento has absorbed 688,000 sq. ft. of industrial space thus far in 2017, reports CBRE.
The city’s vacancy has fallen under 7% for the first time, dropping 270 basis points year-over-year, JLL says, forecasting total vacancy for 2017 at 6.4%. Tenant improvements are stable.
Nearly halfway through the year, Philadelphia has already absorbed 765,000 sq. ft. of industrial space.
JLL forecasts 5.9% total industrial vacancy in 2017 and says the pace of tenant improvements is stable.
About 872,000 sq. ft. has been absorbed year-to-date in Columbus, according to CBRE.
Net absorption and deliveries are about even so far this year, says JLL, and the firm forecasts total industrial vacancy in 2017 as 5.3%. Tenant improvements are falling.
15. Los Angeles
Los Angeles places in #15, with year-to-date industrial net absorption at 991,000 sq. ft. so far this year.
The market in Los Angeles is exceptionally tight. JLL forecasts 0.9% total vacancy in 2017. Net absorption and deliveries are about even. Tenant improvements are falling.
Pittsburgh breaks the million sq. ft. mark, absorbing 1.035 MSFT year-to-date, CBRE reports.
JLL forecasts total industrial vacancy in 2017 at 8.3% and says tenant improvements are stable.
13. Kansas City
Thus far in 2017, Kansas City has already absorbed 1.092 MSFT, according to CBRE. The city is forecast to end 2017 with 5.3% total industrial vacancy, says JLL. Tenant improvements are falling.
Portland has absorbed 1.137 million sq. ft. of industrial space year-to-date, CBRE says.
Total industrial vacancy for 2017 is forecast as 3.5%, according to JLL. However, in the first quarter, deliveries outpaced supply. Tenant improvements are stable.
11. Las Vegas
In Las Vegas, 1.269 million sq. ft. has already been absorbed, according to CBRE.
Net absorption and deliveries are pacing at roughly the same rate, says JLL, which forecasts 6.8% total industrial vacancy for the year. Tenant improvements are stable.
10. Fort Worth
Halfway through the list, and well over 1.2 million sq. ft. in activity! CBRE says that Fort Worth has experienced 1.283 million sq. ft. of industrial net absorption year-to-date 2017.
Phoenix ranks in ninth place for the year so far, already absorbing 1.637 million sq. ft., CBRE reports.
Deliveries have slightly outpaced net absorption year-to-date, JLL reports, and total industrial vacancy is forecast at 8.8%. Tenant improvements are falling.
Year-to-date 2017, Tampa has experienced 1.642 million sq. ft. of industrial net absorption, according to CBRE.
Total industrial vacancy is forecast at 5.7%, according to JLL. The firm finds net absorption outpacing deliveries year-to-date, and tenant improvements down.
Boston has absorbed 1.899 million sq. ft. of industrial space so far this year, CBRE says.
Net absorption year-to-date has far outpaced deliveries, JLL reports, and total vacancy is forecast at 7.4%. The rate of tenant improvements is falling.
Detroit breaks the two million mark! CBRE calculates Motor City has experienced 2.466 million sq. ft. of industrial net absorption, year-to-date 2017. That ranks it in sixth place so far this year.
JLL says its expects more industrial construction and investment announced this year in the city. Tenant improvements are falling, according to the firm, and total vacancy is forecast as 6.6% in 2017. This is another city wherein net absorption has far outpaced deliveries year-to-date, according to JLL.
Chicago’s year-to-date 2017 industrial net absorption stands at 2.521 million sq. ft., CBRE finds.
The pace of tenant improvements is stable, but new supply is outpacing net absorption, according to JLL. JLL forecasts total vacancy as 7.2% for the year.
Cincinnatti has experienced 3.311 million sq. ft. in net absorption of industrial space, according to CBRE.
Another tight market, Cincinnatti’s total vacancy is forecast at just 2.9%, JLL says. Net absorption is outpacing deliveries so far this year, and the rate of tenant improvements/concessions is falling, JLL notes.
Dallas experienced industrial net absorption of 5.035 million sq. ft., placing it in third place, according to CBRE.
Deliveries are slightly ahead of net absorption, reports JLL, which forecasts total vacancy at 6.1% this year. Nevertheless, the rate of tenant improvements is falling.
So far, Atlanta has experienced 6.011 million sq. ft. of industrial net absorption, CBRE reports.
JLL forecasts total vacancy for this market as 7.9%. Net absorption has outpaced deliveries, JLL finds, and the pace of tenant improvements is stable.
Riverside is pacing as the market that’s hungriest for industrial assets this year! CBRE data places net absorption at 7.114 million sq. ft. year-to-date 2017.
Riverside and San Bernardino make up the Inland Empire MSA. Net absorption of industrial assets within the Inland Empire has outpaced deliveries year-to-date, according to JLL. JLL forecasts another tight year for the Inland Empire, with just 3.4% total vacancy. The rate of tenant improvements has been stable.