While the COVID-19 pandemic has devastated commercial real estate sectors such as retail, office and hospitality, it has provided a boost to industrial, a segment of the industry that was already thriving before the pandemic hit.
And today as the pandemic continues to recede in the United States? The industrial market continues to boom.
That’s the takeaway from the June National Industrial Report released by CommercialEdge. According to the report, lease rates for industrial space across the country averaged $6.59 a square foot in May. That’s an increase of 4.4 percent when compared to the same month in 2020.
Not all cities are seeing the same amount of rent growth, though, with CommercialEdge reporting that the highest rent growth continued to be seen in coastal cities, with the Southern California markets of Inland Empire and Los Angeles ranking first and second in year-over-year rent growth.
The national industrial vacancy rate hit 5.7 percent in May. And in the Midwest, the Nashville, Tennessee, industrial market’s vacancy rate fell to 3.1 percent in May.
Another impressive number? As of May 31, $18.1 billion in transactions closed across the U.S. industrial markets that CommercialEdge tracks. The average sales price per square foot for industrial space was $103 in May. That’s 16.3 percent higher than in May of 2020.
CommercialEdge doesn’t expect the good times to end throughout the rest of this year, either. The company said that U.S. industrial sales could match or even beat the record $44.4 billion in transactions closed in 2020.
The numbers also show that sale-leaseback transactions have become increasingly popular in this sector. Such deals accounted for 7 percent of the total U.S. industrial sales closed last year and 9 percent of property trades made since the start of this year. Among the industrial transactions closed during the previous 17 months across the markets tracked by CommercialEdge, sale-leaseback deals amounted to $4.8 billion.
These deals have been valuable. CommercialEdge says that since the beginning of 2020, the price of a sale-leaseback deal has averaged $116 a square foot, significantly higher than the overall average of $93 a square foot of industrial space sold during that same time.
CommercialEdge found three markets that have already exceeded $1 billion in industrial deals closed since the start of 2021. That includes Chicago, which has seen $1.1 billion in industrial sales since the beginning of the year, behind only Los Angeles and Inland Empire.
CommercialEdge found, too, that there is plenty of industrial space now under construction. In May, 410 million square feet of industrial space was being built in the U.S. markets the company covers.
And Chicago ranks high here, with 20 million square feet of industrial space under construction at the close of May. This figure is behind only the 28 million square feet set to come online in the Dallas-Forth Worth metropolitan area.