In spite of rising financing prices and overall economic instability, the U.S. new development pipeline continued to grow in the third quarter, according to recent statistics from Commercial Edge, indicating that demand for space continues to outpace the rate of new deliveries. At the end of October, 4.0% of the stock, or 713.6 million square feet, of industrial space was under development.

Additionally, this year has already seen deliveries of roughly 350 million square feet, which are historic highs. Despite this, the national vacancy rate decreased gradually during the year, reaching 4% in October.

Port Markets Continue to Lead the Pack in Rents

The top markets in the nation have seen an increase in industrial rents all year, with the average national in-place rent for industrial property standing at $6.95 per square foot in October. That was a 5.8% year-over-year gain and a seven-cent bump over September data.

Port markets continued to dominate the nation in terms of both new leases and in-place rent increases. In Southern California, as they did for the previous two years, in-place rentals have climbed at the fastest rate, driven by the Inland Empire’s double-digit price growth. Boston and New Jersey on the Eastern Seaboard had significant rent rises, and it is anticipated that demand will continue to rise in these cities.

The premiums renters pay for new leases have also risen over the past 12 months; new leases now cost $1.54 per square foot more than the overall national average for leases. The highest disparities were, of course, in port markets that were already expensive and had limited room for growth.

In October, there were 4.0% vacant positions nationwide, a drop of 10 basis points from September. The lowest vacancy rates continued to be in port regions, although non-port markets with significant logistical activity still faced low levels of available space. Atlanta, Nashville, Indianapolis, Columbus, and Kansas City were among those with vacancy rates under 3%.

Industrial Starts Continue at Robust Pace

At the end of October, there were 713.6 million square feet of industrial space under development or 4.0% of the current national stock. It is anticipated that plans for future projects would add a similar amount of area. A large portion of the industrial space being built in the U.S. is being driven by shipping, logistics, and chip fabrication.

Seven Amazon distribution facilities totaling more than two million square feet began their national development in 2021. But early this year the business recognized that its growth had been excessive, and only broke ground on three projects. Shipping and logistics make up about half of the 20 largest industrial projects now under development, notwithstanding the retail giant’s retreat.

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