E-commerce Dips but Continues Sustaining Demand as Industrial Rents Post 3.8% Y-o-Y Rise 

Key Takeaways: 

• November’s national average rent climbed to $6.37 per square foot  
• Nationwide vacancy rate averaged 5.7%, ranging from 1% to 11.6% among markets 
• Year-to-date sales totaled $62 billion; average price per square foot reached $111 
• Over 555 million square feet of new supply in development nationwide 

E-Commerce Numbers Slip in Third Quarter

After a massive spike during the second quarter of 2020, e-commerce sales have fallen three of the last five quarters. If e-commerce’s share of core retail sales stood at 19.4% during the surge’s peak, it declined to 16% in the third quarter of 2021. Furthermore, both Target’s and Walmart’s third-quarter earnings noted continued but slowing growth of online sales and rises in in-person or pick-up orders.  

But despite the dip, e-commerce sales are still ahead of where they would be on the pre-pandemic trend line, pointing to a structural shift in the market — and to the emergence of an omnichannel approach in the future of retail.  

Read to the end and download the full December 2021 report for updated lease rate and vacancy stats for all major U.S. markets.

Southern California Records Fastest Rent Growth Among Top U.S. Markets 

Across the top 30 U.S. markets, November rents for industrial space averaged $6.37 per square foot, up 3.8% year-over-year. Two Southern California markets and the Bay Area are among the top five markets by rent growth, as the shift from services to goods continues fuelling demand in port and port-adjacent areas.  

The Inland Empire ($6.49/sq. ft.) and Los Angeles ($10.23/sq. ft.) saw the fastest rent growth in the nation, with industrial space rates rising by 6.2% in both markets over the past 12 months. Furthermore, rents for industrial space in the Bay Area rose by 5.3%, averaging $10.93 in November. The ports of Los Angeles and Long Beach are still adjusting to increased demand, while tight vacancy rates, scarcity of developable land or a combination of both are pushing rents upwards — in California — as well as Nashville ($5/sq. ft., up 5.6%) and New Jersey ($7.98/sq. ft., up 5.4%), which round out the top five.  

Meanwhile, the national vacancy rate rested at 5.7% in November. Vacancies remain tightest for industrial space in the Inland Empire (1%), followed by Columbus (2.3%) and Nashville (3%).  

Year-to-Date Sales Volume Tops $61 Billion, Continues Record-Breaking Streak 

Transactions closed through the first 11 months of the year totaled $61.6 billion across the markets we analyzed, an all-time high for sales volume. In addition, sales prices averaged $111 per square foot in November, up 27.4% year-over-year.  

Despite being the 15th largest market in the country by total inventory, Phoenix had the third-highest sales volume, recording $3.6 billion in industrial space transactions through the end of November. Los Angeles and Chicago are the only industrial markets to surpass the booming industrial hub. Transactions for industrial space in Los Angeles amounted to $6 billion during the first 11 months of the year, while the Chicago sales volume exceeded the $4 billion threshold last month.  

Port markets in Southern California also lead the ranking in terms of sale prices — industrial space in Los Angeles changed hands for an average of $301 per square foot in November, while Orange County industrial space sold for $292 per square foot, on average. At the same time, the average sale price in the Bay Area rested at $229 per square foot.  

Close to 294 Million Square Feet of Industrial Space Delivered Through End of November  

By the end of November, 293.9MSF (million square feet) of industrial supply was delivered nationally. An additional 555.4MSF of industrial space is currently under construction, making up 3.4% of the total stock on a national level.  

The Phoenix pipeline remains the most robust out of the top U.S. markets, as projects under construction or in the planning stages account for a significant 29.1% of the existing industrial stock in the market. Indianapolis trails from behind, with 13% of the industrial space in the market being made up of under-construction and planned developments. Meanwhile, underway and planned industrial stock in Charlotte (10.9%) — which saw close to 10MSF in deliveries this year — comes in third. 

Download the complete December 2021 report for a full picture of how U.S. industrial markets fared in the first 11 months of the year, including insights on industry and economic recovery fundamentals.

You can also see our previous industrial reports.

Methodology 

CommercialEdge added new markets to the National Industrial Report as Yardi Market Insight has increased its coverage to more than 50 markets in recent months. As such, the national numbers in this and future reports are not comparable to past issues. 

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; and forecasts, as well as the economic indicators most relevant to the performance of the industrial sector. For a detailed methodology, download the full report above.