Rising interest rates and persistent inflation haven’t slowed the U.S. industrial sector. At least not yet.
That’s the takeaway from CommercialEdge’s November National Industrial Report.
Some numbers showing just how strong the U.S. industrial sector is still performing? First, CommercialEdge reported that national industrial in-place rents averaged $6.95 a square foot at the end of October. That’s a high figure, and is up 5.8% from one year earlier.
The sector’s national vacancy rate fell 10 basis points, too, dropping to 4% at the end of October. In the Midwest, Nashville, Indianapolis, Columbus and Kansas City all boasted industrial vacancy rates of less than 3%.
Developers, seeing the strength of this sector, have remained busy, too. CommercialEdge reported that nearly 714 million square feet of industrial space was under construction at the end of October. This is despite Amazon’s pullback from its aggressive expansion policy.
With so many positive factors, it’s not surprising that investors continue to buy industrial assets. According to CommercialEdge, year-to-date sales volume in this sector increased by $6.5 billion in the United States.
In the Midwest, Indianapolis and Columbus are both benefitting from strong industrial activity. CommercialEdge reported that 7.4% of the industrial stock in Indianapolis is currently being developed, which will add 24 million square feet of industrial space to this Midwest market. In Columbus, developer are building 16.7 million more square feet of industrial space in the market.
This is not a surprise when you consider the low industrial vacancy rates in these markets, 2.5% in Indianapolis and a scant 1.6% in Columbus.
And Detroit claimed the sharpest industrial rent growth in the Midwest. In October, industrial rents were up 6.2% on a year-over-year basis. Industrial rents rose in the Detroit market to $6.15 a square foot, making it the second-priciest industrial market in the Midwest.