Manufacturing Growth Set to Fuel Industrial Space Demand 

Key Takeaways:

• National in-place rents for industrial space averaged $8.35 per square foot in January, a 6.8% year-over-year increase.    
• The vacancy rate for industrial spaces stagnated month-over-month, at a national average of 8%. 
• Dallas-Fort Worth led the nation in industrial transactions in 2024, closing nearly $6 billion in deals. 
• The Bay Area posted the highest sale prices nationwide at the end of 2024, with properties trading at $414 per square foot 
• The highest premiums for a new lease were seen along the East Coast, with a new lease costing $5.22 more per foot in Bridgeport, $4.96 more in Miami, and $4.31 more in New Jersey.   
• Charlotte is seeing a major manufacturing boom, with projects making up one-third of all industrial development in the market. 

Trends & Industry News

Manufacturing Grows Amid Headwinds 

Manufacturing continued to expand at the beginning of 2025, with over 100 million square feet of manufacturing space delivered since 2022 and another 100 million currently underway. However, the industry still faces challenges in terms of bringing about a full-scale manufacturing resurgence.  

According to the U.S. Census Bureau, construction spending on manufacturing has increased threefold since 2021, driven by a variety of factors. The weakness exposed in supply chains during the pandemic led to firms reshoring production. National security concerns and the push for renewable energy led to the federal government’s support of the domestic production of goods during the previous presidential administration. This signed legislation included billions of dollars in incentives for the stateside production of electric vehicles (EVs) and their batteries, as well as computer chips and clean energy technology. The new administration is taking a protectionist stance to trade with the goal of boosting stateside production, although some of the previous funding may be at risk.  

The wave of spending is only the beginning of manufacturing’s impact on industrial real estate in the coming years. The so-called multiplier effect of manufacturing facilities—the supplier and logistics networks that locate nearby to support the production of goods—will spur millions of square feet of additional development. This effect can vary greatly based on product type being manufactured, with automobiles typically seeing the largest multiplier. It can be seen clearly in the Savannah – Hilton Head market, where Hyundai is currently building a $5.9 billion, 17 million square foot EV plant in the market, with some portions of the project already completed and cars beginning production last October. Multiple suppliers for Hyundai, such as Daechang Seat Company and Ecoplastic Corporation, opened facilities in the market last year and a handful more are on the way.  

It’s not only the initial boost in activity that we see by these semiconductor, EV and battery super projects, but the supportive projects downstream that have helped buoy the construction pipeline and economic impact of the primary development.

Peter Kolaczynski, Director, CommercialEdge 

While we expect manufacturing to be a major driver of industrial development and activity going forward, the sector will also face some significant headwinds. Location selection will be a major challenge for manufacturing sites. Moreover, the availability of land will be a significant issue, as will access to water and power, and the scarcity of these resources will be amplified the larger these facilities become. Finding locations with a significant pool of skilled labor, as is required for most advanced manufacturing, will also present a challenge. Potential tariffs threaten to disrupt the manufacturing sector, especially among firms that have nearshored facets of production to Mexico and opened plants along the Southern border. Trade policy may also ignite a trade war and trigger retaliatory tariffs that could jolt manufacturers that export a significant portion of their goods. 

Rents and Occupancy

Port Market Rents Increase Despite Vacancies

National in-place rents for industrial space averaged $8.35 per square foot in January, up five cents from December and 6.8% over the past 12 months.  

Port-adjacent and the Southeast markets continue to see the highest gains in in-place rents. New Jersey led the nation with a 10.9% in-place rents increase over the last twelve months, followed by the Inland Empire (9.2%), Miami (9.2%), Nashville (9.0%) and Atlanta (8.6%). While the new supply boom has driven a spike in industrial vacancy rates in these markets, average in-place rents have continued to grow due to strong demand for that new space, which is typically high quality and more expensive than the market average of in-place rents.  

Average Rent by Metro 

The national vacancy rate was 8.0% in January, unchanged from the previous month. Vacancy rates have increased in nearly every market over the last two years due to the dual impacts of new supply and stabilizing demand. However, as the supply boom fades, we anticipate that industrial vacancy rates will plateau in 2025 before beginning to tick back down sometime towards the end of the year. Long-term demand drivers remain solid, and the new deliveries are expected to decelerate through the end of next year, leading to the absorption of currently vacant space.  

The spread between market average in-place rents and the average rate of a lease signed within the last twelve months was $2.22 per square foot in January.  

The highest premium for a new lease was along the East Coast, with a new leasing costing $5.22 more per square foot in Bridgeport, followed by Miami ($4.96), New Jersey (4.31) and Boston ($4.09). 

Supply

Charlotte’s Manufacturing Boom

Across the U.S., 346.2 million square feet of industrial space was under construction as of January, representing 1.7% of the total stock, according to our U.S. industrial market report. 

Southeast markets have seen a surge in manufacturing development in recent years. Nearly two million square feet of Charlotte’s under construction pipeline is comprised of manufacturing facilities, representing a third of all space currently underway in the area. An additional 1.9 million square feet of manufacturing projects are in the planning stages, the equivalent of 13% of the planned pipeline. Warehouse and distribution development will persist in the market due to its central location and the demographic expansion in the region. However, we anticipate that manufacturing will continue to grow in significance in this market throughout the coming years.  

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

Some firms are making notable manufacturing investments in Charlotte, including Bosch, which is investing $130 million in a 325,000 square feet facility in Lincolnton that will make power tool accessories. Corvid Technologies is adding a 200,000-square-foot manufacturing building to their headquarters expansion in Mooresville, while a former Philip Morris site in Cabarrus County has more than $1 billion in planned investment coming. A facility from Eli Lilly is already underway, with planned developments from Rauch and Red Bull, with Ball joining soon. 

Transactions

Southern California Falls from Top of Sales Volume

Industrial transactions totaled $69.2 billion in 2024, according to our U.S. industrial market report, with properties trading at an average of $129 per square foot.  

The sector has slowly moved away from being dominated by port-adjacent markets in the recent quarter, a trend that can be seen in 2024’s year-end sales data. Dallas-Fort Worth led the nation with nearly $6 billion in industrial sales last year, followed by Houston ($3.4 billion) and Phoenix ($3.4 billion). Los Angeles saw the biggest sales volume of any port market in 2024 and finished fourth overall, with $3.2 billion in industrial sales. This contrasts with previous years, where port-adjacent markets outpaced the nation in sales activity. Los Angeles led the nation in sales volume in 2022 and had the second-largest volume in 2023. The Inland Empire experienced an even more pronounced slowdown, with volume falling by 45% from 2023 when the market led the country with $4.3 billion in sales.  

2024 Sales (Millions) 

While sales volume decreased in Southern California in 2024, the average sale price of an industrial property was sticky. In the Inland Empire, the average price per square foot increased by 5.3% over 2023, while in Los Angeles the prices slipped just 2.5%. 

Western Markets

Bay Area Posts Highest Sale Prices Nationally 

In January, most Western markets saw vacancy rates below the national average of 8%. However, Seattle had one of the highest vacancy rates in the West at 8.4%, marking a 240-basis-point increase year-over-year. Phoenix and the Inland Empire followed closely, with vacancy rates of 7.9%, slightly below the 8% national average. Phoenix saw a significant vacancy rise of 420 basis points, while the Inland Empire experienced a 280-basis-point increase, highlighting a trend of rising vacancies across key markets in the region. Conversely, Orange County continues to drive high demand for industrial space, with a vacancy rate of only 5%, one of the lowest among top industrial markets.  

The Bay Area continued to lead the nation in sale prices, posting the highest rate per square foot nationwide in December 2024 at $414, up from $334 at the end of 2023. Other California markets also ranked among the most expensive industrial hubs, with Orange County at $314 per square foot, Los Angeles at $294 per square foot, and the Inland Empire at $261 per square foot. Phoenix led the region in total industrial sales volume, closing $3.4 billion in transactions by the end of 2024, a significant increase from $2 billion recorded in 2023. Los Angeles and the Bay Area followed closely, with roughly $3.2 billion and $3.1 billion in sales, respectively. Conversely, Central Valley and Portland recorded the lowest industrial sales volume among major Western markets, with $507 million and $500 million, respectively, reflecting more limited transaction activity in those areas. 

West Regional Highlights

In-place rents in the West remained elevated, with the Central Valley being the only market with in-place rents below the national average. Orange County ($16.56), Los Angeles ($14.99), and the Bay Area ($13.48) continued to be the most expensive markets nationwide, however, industrial rent growth in these markets has slowed down year-over-year. In January 2024, the rent growth, in Los Angeles stood at 12.1% vs. 7.6% in January 2025 and in the Bay Area, it stood at 7.1% vs. 5.9%. Orange County also led the nation in average new lease rates, hitting $18.46 per square foot for leases signed over the past 12 months. The most notable rent growth in the West was seen in the Inland Empire, where in-place rents increased by 9.2% year-over-year to $11.06 per square foot. Meanwhile, Phoenix and Seattle posted the widest lease spreads in the region, at $3.83 and $3.81 per square foot, respectively, reflecting notable increases in rates for newly signed leases.  

At the start of 2025, Phoenix remained the most active industrial construction market in the Western region and second nationally, with 17.7 million square feet underway. However, Phoenix’s pipeline has continued to shrink significantly, down from 41.6 million square feet a year prior. Still, the market maintained the highest pipeline on a percentage-of-stock basis nationwide, with 4.1% of its total inventory consisting of active industrial projects. The Inland Empire was the only other Western market with more than 10 million square feet in development, totaling 10.3 million square feet in January. Like Phoenix, the market recorded a year-over-year decline from 13.5 million square feet in early 2024. 

Midwestern Markets

Lowest Sale Prices and Construction Growth Define Industrial Midwest

As of January, Chicago recorded one of the highest vacancy rates in the nation – and the highest in the region – at 10%, a sharp 530-basis-point increase year-over-year. Conversely, Detroit had one of the lowest vacancy rates nationwide at 5.5%, with only a modest 50-basis-point rise, highlighting its relative stability amid broader market shifts.  

Midwestern industrial markets remained more affordable than other regions at the beginning of 2025, with all major markets posting in-place rents below the national average of $8.35 per square foot. The Twin Cities recorded the highest in-place rents in the region at $7.20 per square foot, followed by Detroit at $7.02. St. Louis had the lowest rent in the Midwest and the second-lowest in the nation, at just $4.82 per square foot. Detroit stood out by recording the slowest industrial rent growth in the nation at 2.9%. Columbus was the only Midwestern market to surpass the national rent growth rate, reaching 7.4% year-over-year. Except for Detroit, most Midwestern markets saw lease spreads below the national average, with less than $2 per square foot difference. 

Midwest Regional Highlights

Midwestern markets recorded the lowest industrial sale prices nationwide at the end of 2024, with prices ranging from $95 per square foot in the Twin Cities to just $59 per square foot in Cleveland – the most affordable among major industrial hubs. Despite low sale prices, Chicago stood out with a significant transaction volume, closing $3 billion in total industrial sales as of December—the sixth-highest total among top U.S. markets. On the other hand, Cleveland not only had the lowest price per square foot but also posted one of the lowest total sales volumes nationally, with just $519 million in transactions by year-end.  

Contrary to the national trend of slowdown in development pipeline, some Midwestern markets are seeing increased activity compared to a year ago. Kansas City led the Midwest in industrial development at the start of 2025, with 11.2 million square feet under construction—an increase from 10.7 million square feet a year earlier. The market also ranked third nationally for industrial development on a percentage-of-stock basis, with 3.8% of its total inventory consisting of active industrial projects. Detroit and Columbus also saw steady industrial development growth. In Detroit’s case, the pipeline went from 7.84 million square feet in January 2024 to 7.92 million square feet in January 2025, while Columbus saw a rise to 6.82 million square feet under construction from 5.33 million square feet a year prior, highlighting a continued demand for industrial space in key Midwestern logistics hubs.   

Southern Markets

Strong Transaction Activity in Southern Markets, with Dallas-Fort Worth in the Lead

In January 2025, industrial rents in the Southern region remained relatively affordable, with Miami standing out as the only market to surpass the national in-place rent average of $8.35 per square foot. Miami ranked as the fourth-most expensive industrial market in the nation, with in-place rents reaching $12.25 per square foot, reflecting a strong 9.2% year-over-year increase. The market also recorded the second-widest lease spread nationwide, at $4.96 per square foot, highlighting the sharp increases in rates for newly signed leases. In contrast, Memphis posted the lowest average in-place rents in the country at just $4.09 per square foot.  

Southern industrial markets saw a mix of affordability and high transaction activity at the end of 2024. Charlotte posted the lowest sale price in the region—and one of the lowest nationally—at just $89 per square foot, down from $93 a year prior. Only two Southern markets exceeded the national average sale price of $129 per square foot: Dallas-Fort Worth and Baltimore, both closing December at $133 per square foot. Despite lower prices compared to other major markets, Dallas-Fort Worth and Houston led the nation in total industrial sales volume. DFW recorded roughly $6 billion in transactions, the highest in the country, while Houston followed with $3.4 billion in deals at the end of 2024. 

South Regional Highlights 

Dallas-Fort Worth also continued to lead industrial development in the South, with 22.6 million square feet under construction in January 2025. While this marked a year-over-year decline from 28.6 million square feet in January 2024, the market recorded a notable month-over-month increase from 18.9 million square feet at the end of December. Houston and Memphis also reinforced the South’s position as a key hub for industrial expansion, both logging year-over-year increases in construction activity. Houston’s pipeline grew from 9.6 million square feet to 13.2 million, while Memphis went from 10 million square feet to 11.7 million over the same period. Although Baltimore’s industrial pipeline remains among the smallest nationally, the market saw significant growth in construction activity, more than doubling its pipeline from 920,000 square feet in January 2024 to 2.5 million square feet in January 2025. This surge highlights emerging industrial demand in the region, signaling potential shifts in market dynamics.  

Southern industrial markets continued to post some of the highest vacancy rates in the nation, such as Dallas-Fort Worth, with a 9.3% rate, reflecting a significant 480-basis-point increase over the past 12 months. Memphis also recorded a high vacancy rate of 8.9%, up 350 basis points, while Baltimore followed at 8.5%, marking a 250-basis-point rise. In contrast, Houston had the lowest vacancy rate in the region at 6.5%, with only a modest 60-basis-point increase year-over-year, indicating relative stability compared to other Southern markets. 

Northeastern Markets

Bridgeport Leads Nation with Widest Lease Spread 

New Jersey stood out with one of the highest industrial vacancy rates among major markets at 9.1%, reflecting a 450-basis-point increase year-over-year. Conversely, Bridgeport ranked as the second-tightest market nationwide with a 4.2% vacancy rate, marking a 140-basis-point decline year-over-year, signaling solid demand for industrial space. It also registered the largest lease spread nationally, at $5.22 per square foot. 

The Northeast continued to see strong prices and transaction activity at the end of 2024. Philadelphia was the only market in the region with industrial properties trading below the national average price, at $126 per square foot—a slight increase from $120 per square foot a year prior. New Jersey and Boston recorded higher prices, with industrial properties selling for $210 per square foot in New Jersey and $163 per square foot in Boston. New Jersey also led the region in total sales volume, closing $2.8 billion in industrial transactions—a slight increase from $2.7 billion at the end of 2023, highlighting continued investor confidence in the market. 

Northeast Regional Highlights

Northeastern industrial markets recorded some of the highest in-place rents in the country in January 2025, with New Jersey ($11.57 per square foot), Boston ($11.03), and Bridgeport ($9.56) all exceeding the national average of $8.35 per square foot. Philadelphia was the only top Northeastern market with in-place rents below the national average, at $8.26 per square foot. However, it registered the highest year-over-year industrial rent growth in the region, at 7.7%, signaling an upward trajectory in industrial leasing rates.  

Philadelphia also remained the most active industrial development market in the region, with 11 million square feet under construction as of January 2025. This represents a significant year-over-year increase from 7.8 million square feet, reinforcing the city’s growing industrial sector. Conversely, Boston recorded one of the steepest declines in industrial construction in the region. The market’s pipeline dropped by more than half, from 3.1 million square feet in January 2024 to just 1.5 million square feet at the beginning of 2025. Similarly, Bridgeport saw an even more dramatic reduction, with its industrial pipeline shrinking from nearly 3 million square feet a year ago to just 410,000 square feet in January. These declines reflect shifting industrial demand and persisting slowdowns in new developments across key Northeastern markets. 

Economic Indicators

E-Commerce Grows in Fourth Quarter

E-commerce sales totaled $308.9 billion in the fourth quarter of 2024, according to the U.S. Census Bureau, a 2.7% increase in the quarter and 9.4% year-over-year. E-commerce’s share of core retail sales grew to 19.3%, up 20 basis points from the previous quarter. E-commerce’s share of retail sales has grown for eight consecutive quarters.    

E-Commerce Volume

During the last two years, e-commerce growth has looked more like it did in the previous decade than it did during the first few years of this one. Between 2010 and the first quarter of 2020, both e-commerce sales overall and its share of retail sales grew at a steady, predictable rate. The pandemic upended this paradigm, though it appears to have returned in the last two years. We expect e-commerce sales to continue as a major driver of industrial real estate demand, even as growth has stabilized. Estimates place e-commerce sales as needing three times as much square footage per dollar than traditional brick and mortar, and retailers continue to expand their online and omnichannel options for consumers. 

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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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