Data issued today by Chicago-based industrial real estate firm JLL again highlighted very strong fundamentals for the U.S.-based industrial real estate market, for the second quarter.
In its “U.S. Industrial Outlook: Q2 2022,” JLL cited various factors driving continued market strength, paced by rents topping the $8.00 per square-foot (PSF) mark, at $8.01, its highest level on record, with annual rent growth up 21% annually. Average PSF rents for warehousing & distribution and manufacturing came in at $8.04 and $7.79, respectively, with special purpose at $11.07.
JLL Global Head of Industrial Research Mehtab Randhawa wrote in the report that heightened competition was a key factor in rising rent gains, observing that since the pandemic rents have matured significantly, with rent growth expected to continue, albeit not at the same rates.
Key takeaways cited by JLL in the report included:
For the last data point, JLL said that as companies focus on their core strategies of shifting from retail to online, distribution and supply chain-related operations are expected to get transferred to 3PLs.
And Kelsey Rogers, Manager, Industrial Research, JLL, said in an interview that growth in e-commerce and retailers struggling to get their inventories to the customer on time continues to be the two driving factors for demand from the Logistics & Distribution and 3PL industries.
JLL’s Randhawa added in the report much of the quarterly tenant movement is due to the influx of inventories now being delivered, following the supply chain crisis earlier in 2022, as well as companies expanding inventories to avoid further supply chain shortages, a trend that is expected to continue over the next few quarters, and potentially expand into 2023, as the supply chain crisis persists.
Addressing the industrial pipeline—at more than $586.7 MSF, Rogers, that since the pandemic building delivery times have doubled, which has contributed to the gap between demand and supply.
“As demand continues to outpace supply, and deliveries are pushed out, we anticipate the imbalance to continue; however, given that many markets are seeing extremely low vacancies we anticipate any new supply will alleviate current demand,” noted Rogers.
On a regional basis, JLL’s data found that the markets with the lowest vacancies were: Savannah (0.1%); Inland Empire (0.4%); Los Angeles (0.7%); New Jersey (1.1%); Orange County (1.3%); and Hampton Beach (1.4%). And for highest year-to-date net absorption, the top markets were: Chicago (17,028,517); Eastern and Central PA (16,912,848); Dallas/Ft. Worth (15,053,825); Houston (14,385,631); Phoenix (11,761,483); and Indianapolis (10,006,695).