Industrial Sector Stabilizes in 2024 with Balanced Demand and Reduced Supply 

Key Takeaways:

• The national vacancy rate was 7.5% in November, an increase of 10 basis points month-over-month and a significant rise from two years ago when the national rate sat below 4% 
• Nationwide, over 361 million square feet of industrial space was under construction, with the pipeline seeing the first month-over-month growth this year 
• Industrial transactions totaled $54.6 billion through November, on track to match the 2023 total sales volume by the end of the year 
• Industrial assets traded at an average of $128 per square foot, marking a 2.7% price increase from last year 
• The cooldown in Southern California markets persists, with the Inland Empire, the leader in rent growth earlier this year, falling to third place with a 10% year-over-year increase 
• Midwestern markets continued to trail the national average in-place rents, with the Twin Cities coming closest with $7.21 per square foot 

Trends & Industry News

Industrial Sector Normalizes in 2024

After running hot for several years, 2024 was a year of stabilization and normalization for the industrial sector, though it was not without challenges. The historic wave of new supply began to taper off in 2024, our U.S. industrial market report shows. This reflects the drop in construction starts that began last year as demand for space cooled and higher borrowing costs made construction loans more expensive.  

Over 1.1 billion square feet of space was delivered between 2022 and 2023, but only 330.7 million square feet were delivered in 2024 through the end of November. While that represents a significant decline in industrial construction, this year will still conclude with more completions than any year prior to 2020 during this century, as tracked in our database. The slowdown in new supply is expected to persist, according to industrial property outlooks, as construction starts have totaled 208.7 million square feet so far this year. 

The supply boom that began in 2021 may have wound down in 2024, but its impact on vacancies is still evident. Two years ago, the national industrial vacancy rate was below 4% and the hottest markets had rates under 2%. This year, nearly every market saw a substantial increase in vacant space and the national vacancy rate sits at 7.5%. 

The market is steady and reasonable. The pullback in construction was inevitable and expected this year. As space gets absorbed in 2025 and 2026, we expect vacancy rates to plateau and the appetite for further development to pick up toward the latter part of the decade.

Peter Kolaczynski, Director, CommercialEdge 

Through November, $54.6 billion in industrial sales were recorded, following $62.8 billion in 2023. Given the lag in the collection of some sales data, it is likely that the final 2024 sales figure will be close to last year’s total. While transaction volume remained relatively stable, the average sale price of an industrial asset has increased by 2.7% this year, reaching $128 per square foot. This represents a larger increase than in 2023 when prices grew by 1.5%.  

However, the gains over the past two years were modest compared to 2021, which saw a 25.6% year-over-year growth in average sale prices. Moreover, 2022 also saw a sizable 13.5% increase. Still, the steady average prices of industrial assets, even after rapid growth and in a high-interest-rate environment, show that investor demand for industrial properties remains strong. 

While 2024 was generally a year of normalization for the industrial sector, several events tested the resilience of supply chains. This year saw Yemen’s Houthi rebels attack ships in the Red Sea, a labor stoppage that shut down East Coast ports for three days, a drought in Panama that led to a 29% drop in vessel transit through the canal and the collapse of Francis Scott Key Bridge in Baltimore, which closed the Port of Baltimore for 11 weeks. While none of these events were as massive as the global pandemic that halted the global economy, it is encouraging that supply chains weathered these challenges without large-scale bottlenecks or backlogs. 

Rents and Occupancy

Midwest Trails in Rent Growth

National in-place rents for industrial space averaged $8.25 per square foot in November, up three cents from October and 6.9% over the past 12 months, our latest U.S. industrial market report reveals.  

In-place rents grew fastest in Miami, which saw an 11.1% year-over-year rent increase, followed by New Jersey (10.5%), the Inland Empire (10%) and Atlanta (9.2%). Southern California rents experienced significant growth in recent years but have slowed notably in 2024. 

Midwestern markets continued to see minimal rent increases. Among the top 25 industrial markets covered in our report, six of the bottom eight markets for rent growth were in the Midwest. St. Louis recorded the slowest growth, with in-place rents increasing 2.7% over the past 12 months. Kansas City (3.2%), Detroit (3.6%) and the Twin Cities (4.2%) rounded out the bottom four. 

Average Rent by Metro 

The national industrial vacancy rate was 7.5% in November, up 30 basis points from October. Demand normalization and a wave of new supply have led to an increase in vacancies in recent quarters. 

The spread between the market average in-place rents and new leases signed in the past 12 months was $2.15 per square foot in November. The spread between in-place and new rents was the widest in Miami, where a new lease cost $5.86 more per square foot. Bridgeport ($4.40 per square foot), New Jersey ($4.11) and Phoenix ($4.08) also had significant premiums for leases signed over the past year. 

Conversely, Midwestern markets saw the narrowest spreads between new and in-place rents, with new leases inked over the past 12 months in St. Louis costing slightly less (-$0.17) than the market average rent.

Supply

Data Centers Keep Atlanta Pipeline Flowing 

Across the U.S., 361.1 million square feet of industrial space was under construction in November, representing 1.8% of stock. The industrial pipeline grew for the first time this year, increasing 2.3 million month-over-month. Despite this slight increase, this year marked a continued decline in development, as 330.7 million square feet were delivered in 2024, a significant decline from 2023 when 630.3 million square feet were completed. Meanwhile, construction starts totaled 207.8 million square feet in 2024. 

National Industrial Supply Pipeline Trend (Million Sq. Ft.) 

While most markets’ pipelines have shrunk during the last year, Atlanta’s nearly doubled in size. The market had 9.3 million square feet underway as of November (1.6% of the total stock), but the jump in construction this year did not come from traditional projects. Atlanta’s pipeline previously included mostly logistics and manufacturing projects, but a flood of data centers has started construction in the last 18 months.  

As of November, 5.32 million square feet of data center space was under construction in Atlanta, with 3.1 million square feet starting this year. With an additional 6.4 million square feet in the planning stages, industrial property outlooks show this is likely only the beginning for the market. Only Washington, D.C., with 6 million square feet underway, had more data center space under construction than Atlanta. 

Transactions

Industrial Sales Still Strong Despite Market Challenges

Industrial transactions totaled $54.6 billion through the end of November, according to our U.S. industrial market report, with properties trading at an average of $128 per square foot. Even with elevated interest rates and growing vacancies, capital remained available to purchase the right property in the right location during 2024. 

Year-To-Date Sale Price Per Square Foot 

By total square footage, Chicago is the nation’s largest industrial market — as Southern California is split into three separate markets in our analysis — though it hasn’t matched the sales traction seen in other large markets throughout this decade. While the average sale price of an industrial property has increased by 60% since 2019 on a national level, it has grown by only 35% in Chicago.

The market’s two largest acquisitions this year both occurred in January. LBA Realty purchased two logistics and cold storage buildings near O’Hare Airport, totaling more than 480,000 square feet, for $95 million ($201 per square foot). At the same time, Brookfield Properties spent $83.5 million to acquire a data center in Elk Grove Village as part of its takeover of Cyxtera, which filed for Chapter 11 bankruptcy protection last year. 

Western Markets

Rent Growth Slows in Southern California

The cooldown in Southern California markets persists, with in-place rent growth and new lease rates trending downward. Earlier this year, the Inland Empire and Los Angeles led the nation in industrial rental growth and were the only markets with double-digit increases. However, these markets have fallen behind some Southern and Northeastern industrial hubs. In November, the Inland Empire recorded a 10% year-over-year rent increase, ranking third nationally behind Miami (11.1%) and New Jersey (10.5%). Los Angeles’ growth rate declined from 11% in July to 8.1% in November, ranking eighth among top U.S. industrial markets. 

Orange County continued to be the most expensive industrial market in the nation, with in-place rents at $15.78 per square foot. Yet, the spread between in-place rents and the rates for new leases signed here over the past 12 months was only $2.72 per square foot, trailing Phoenix’s $4.08 spread regionally and falling short of most Northeastern and Southern markets nationally. Similarly, new leases inked in the Inland Empire during the same period averaged $2.12 per square foot more than in-place rents, just slightly below the $2.15 national average. 

Industrial vacancy rates in most Western markets remained below the national average, with Orange County as the tightest market in the region with a 4.2% rate, followed by the Central Valley (5.9%) and Portland (6.4%). However, significant vacancy increases have been recorded across the West over the past year, driven by the surplus in new supply and the normalization of demand for industrial space. The Inland Empire’s vacancy rate rose from 4.9% a year ago to 7.6% in November, while the Bay Area saw a 300-basis-point year-over-year increase to 7.2%. 

West Regional Highlights

Industrial sales activity remained robust across the West, with only three top markets recording year-to-date sales volume below $1 billion: Orange County ($837 million), the Central Valley ($445 million) and Portland ($341 million). The Bay Area emerged as the most sought-after Western market for industrial investment this year, exceeding $3 billion in transactions through November. The market also posted the highest sale prices nationwide, averaging $460 per square foot, significantly above Orange County’s runner-up price of $314 per square foot. 

Industrial development in most Western markets mirrored the national slowdown. The Inland Empire’s construction pipeline contracted from nearly 15 million square feet to 10.1 million square feet underway as of November. In Seattle, the industrial pipeline shrank more than 50% year-over-year to 4.8 million square feet. Meanwhile, Seattle’s vacancy rate climbed from 5.6% to 7.3% year-over-year. However, the market remained among the five most expensive nationwide, with asking rents averaging $11.54 per square foot, reflecting a 7.6% year-over-year increase. Seattle also continued to attract significant industrial investment, logging $1 billion in sales through November — more than double the volume recorded for all 2023. 

Midwestern Markets

Indianapolis Sees Significant Vacancy Spikes

Midwestern markets continued to post some of the lowest industrial vacancy rates nationwide. Kansas City reclaimed its position as the tightest market in the nation, posting a vacancy rate of just 3.3%. Detroit (4.6%), Cincinnati (5.6%) and Minneapolis-St. Paul (6.4%) were all among the top 10 markets with the lowest vacancy rates.  

Conversely, Indianapolis, one of the tightest industrial markets just last year, has seen an increase in vacancies in 2024. The market’s rate rose from 3.2% to 9.6% year-over-year, now the highest rate in the Midwest and third-highest nationally. Indianapolis ranked among the top three most affordable industrial markets nationwide, with asking rents averaging $4.90 per square foot. However, tenants signing new leases over the past 12 months paid $1.53 more per square foot, marking the second-widest lease spread in the region.  

Industrial transactions in Indianapolis were on a downward trend in 2024, with only $274 million in sales logged through November. This marked a sharp decline compared to the market’s annual totals in both 2021 and 2022 when sales exceeded $1 billion. Industrial assets in Indianapolis traded at an average of $71 per square foot, down from $80 per square foot a year ago. Development activity also declined, with the market’s construction pipeline shrinking from 7.5 to 4.3 million square feet year-over-year. 

Midwest Regional Highlights

Despite low vacancies, the leading industrial markets in the Midwest still ranked among the slowest in the U.S. No market exceeded the national average rent growth, with Columbus coming close with a 6.1% year-over-year increase. The market also posted the region’s widest lease spread at $2.09 per square foot. In-place rents in the Midwest also continued to trail the national average, with the Twin Cities coming closest with $7.21 per square foot. In terms of sale prices, the Twin Cities led the Midwest at $95 per square foot, though still far from the national average of $128 per square foot. 

Regarding sales volume, Chicago remained the most active Midwestern market for industrial investment, ranking fourth nationally with $2.5 billion in transactions through November. Minneapolis-St. Paul was the only other Midwestern market to exceed the $1 billion mark, recording nearly $1.2 billion in sales through November.  

Industrial development activity in Chicago saw a significant decline, with the construction pipeline shrinking by 10 million square feet year-over-year to 7.2 million square feet. In contrast, Kansas City and Columbus were among the few Midwestern markets bucking the national trend and seeing increased industrial development. Kansas City led the region with 11.5 million square feet underway, followed by Columbus with nearly 8 million square feet in progress.

Southern Markets

Texas Markets Top the South in Industrial Development 

Memphis continued to be one of the most active markets in the nation in industrial construction, with 10.5 million square feet underway as of November. The market led the South in development on a percentage-of-stock basis, with current projects accounting for 3.5% of its total stock. It also ranked third nationally, surpassed only by Phoenix (5.7%) and Kansas City (3.9%). Meanwhile, Dallas-Fort Worth and Houston were the regional leaders in square footage under construction, with over 16 million and 12.3 million square feet, respectively.  

Conversely, Tampa had the least amount of new development among the Southern markets, with only 2 million square feet under construction. However, Tampa’s industrial pipeline was still 10 times higher than the market with the smallest pipeline among the ones covered in our report, Bridgeport.  

Regarding industrial vacant space, Dallas-Fort Worth, Baltimore and Memphis saw some of the highest vacancy rates in the nation in November. While the national average vacancy rate was 7.5%, Dallas-Fort Worth’s rose to 9.1% (up 80 basis points month-over-month). Meanwhile, Baltimore and Memphis’ vacancy rates were 8.8% and 8.6%, respectively. Miami was the only other Southern market with a vacancy rate above the national average at 7.9%.  

South Regional Highlights 

Miami held its leading position in industrial rents, posting the highest lease spreads in November at $5.86 per square foot. Moreover, the market continued to be the fourth most expensive in the country, with in-place rents averaging $12.11 per square foot. This was also the most expensive average in-place rent in the entire region, as all of the other Southern markets analyzed stood below the national rate of $8.27 per square foot. Miami also registered the nation’s most significant year-over-year rent growth of 11.1%, followed by New Jersey (10.5%) and the Inland Empire (10%).  

Baltimore and Nashville saw the highest sale prices in the region in November, with properties in both markets trading at an average of $132 per square foot, slightly above the national rate of $128 per square foot. Sale prices in every other Southern market remained under the national average. 

Meanwhile, Dallas-Fort Worth led in year-to-date sales volume nationally. Industrial sales in the market totaled $4.2 billion through November, up from the $3.8 billion recorded in October. Houston ranked third nationally, with a total sales volume of $2.8 billion during the first 11 months of 2024, while Atlanta was the only other Southern market to surpass the $2 billion mark in year-to-date sales.

Northeastern Markets

New Jersey in the Lead in Rent Growth

Philadelphia continued to see strong industrial development, leading the Northeast in construction activity despite a slight decrease from the previous month. Over 11.2 million square feet were underway in the market at the end of November, marking the fifth largest pipeline in the U.S. Philadelphia also ranked fourth in development on a percentage-of-stock basis, with current projects totaling 2.5% of its existing stock. Conversely, Bridgeport had the smallest construction pipeline among top industrial markets, with only 200,000 square feet underway in November, down to half the previous month’s total.  

Bridgeport's sales activity also stalled, logging $234 million in industrial sales through November for the second-lowest volume nationally, surpassing only Kansas City ($113M). New Jersey continued to lead the region in industrial sales with $2.3 billion in transactions year-to-date, followed by Philadelphia’s $1 billion.  

Although Boston only logged $639 million in industrial transactions so far, the market is still one of the most expensive for industrial investment nationwide. Sale prices in Boston averaged $161 per square foot, surpassed regionally only by New Jersey with $218 per square foot. 

Northeast Regional Highlights

New Jersey and Boston were the only two Northeastern markets with in-place rents above the national average. In-place rents in New Jersey stood at $11.37 per square foot, while Boston's averaged $10.87 per square foot. New Jersey ranked second nationally in industrial rent growth, with in-place rents rising 10.5% year-over-year, second only to Miami's 11.1% growth.  

Bridgeport stood out as the only Northeastern market with vacancies below the national average. With a rate of only 4.4%, Bridgeport is the third tightest market among leading U.S. markets, behind Kansas City and Orange County. At the other end of the spectrum, Philadelphia's rate grew to 8%, up from 3.8% a year ago. New Jersey also saw a significant year-over-year vacancy surge, from 5.1% to 7.9%. 

Economic Indicators

Strong E-Commerce Growth in Third Quarter

E-commerce sales crossed the $300 billion threshold for the first time in the third quarter, rising 2.6% ($7.5 billion) over the second quarter. This was the highest percentage increase since the second quarter of last year and the third-highest mark since the start of 2022. On a year-over-year basis, online sales have increased by 7.4%. 

E-Commerce Volume

E-commerce’s share of core retail sales reached 19% in the third quarter, a 20-basis-point increase over the second quarter and the largest share since Q2 2020, when the pandemic drove a massive spike in online sales. While a rebalancing period followed the initial surge in e-commerce’s share of core retail sales, the share has now increased for seven consecutive quarters and appears to be fully back on its pre-pandemic trend line. This should be encouraging news for the industrial sector, as online sales are estimated to require three times as much logistics space as brick-and-mortar retail. 

Download the report

Download the complete December 2024 report for a full picture of how U.S. industrial markets evolved in November, including insights on industry indicators and economic recovery fundamentals.

You can also see our previous industrial reports.

Methodology

The monthly CommercialEdge national industrial real estate report considers data recorded throughout the course of 12 months and tracks top U.S. industrial markets with a focus on average rents; vacancies (including subleases but excluding owner-occupied properties); deals closed; pipeline yield; forecasts; and the economic indicators most relevant to the performance of the industrial sector.

Get access to over 13M commercial property records with regularly verified commercial data, including local market insights, recent transactions and loan details with CommercialEdge Research.   

CommercialEdge collects listing rate and occupancy data using proprietary methods.

• Average Rents —Provided by Yardi Market Expert, a cutting-edge service that uses anonymized and aggregated data from other Yardi platforms to provide the most accurate rental and expense information available.
• Vacancy — The total square feet vacant in a market, including subleases, divided by the total square feet of industrial space in that market. Owner-occupied buildings are not included in vacancy calculations.

Stage of the supply pipeline:

• Planned — Buildings that are currently in the process of acquiring zoning approval and permits but have not yet begun construction.
• Under Construction — Buildings for which construction and excavation has begun.

Sales volume and price-per-square-foot calculations for portfolio transactions or those with unpublished dollar values are estimated using sales comps based on similar sales in the market and submarket, use type, location and asset ratings, sale date and property size.

Year-to-date metrics and data include the time period between January 1 of the current year through the month prior to publishing the report.   

Market boundaries in the CommercialEdge industrial report coincide with the ones defined by the CommercialEdge Markets Map and may differ from regional boundaries defined by other sources.   

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