The U.S. industrial market is in the midst of the longest period of growth on record. As a whole, the country has posted 35 quarters of positive absorption in a row. Core markets across the country have thrived during this time, building and absorbing millions of square feet of industrial real estate. While 2019 looks to be another strong year, a variety of factors points to a tapering off of industrial real estate activity for the country in the coming quarters. This does not mean there is not significant opportunity for both investors and occupiers, however.
Emerging U.S. Industrial Markets to Watch in 2019
There remains emerging industrial markets across the country that both provide yield opportunities for investors, and the expansion opportunity for occupiers.
In 2019, we project the 10 markets on this report will provide the most opportunity for both investor and occupiers. In this report we will analyze these 10 markets in depth, provide the area’s population and labor demographics, discuss logistics advantages, give an insider’s perspective on what makes these markets tick, and forecast industrial fundamentals in the coming year.
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live within 50 miles of the market core, and this number is expected to grow 5% by 2023
3.7 million people
Hover over on the map to learn more
square feet of new construction in 2018, the most in a decade.
per square foot per year asking rent is 27.1% higher than 2017.
vacancy rate is an all-time
low for the market.
LAS VEGAS, NV
square feet under construction, the highest on record.
ST. LOUIS, MO
people live within 250 miles
of the market
LEHIGH VALLEY, PA
square feet of net absorption in 2018, an all-time record.
SHENAnDOAH VALLEY, VA
square feet under construction—the most on record.
(absorption as a % of inventory) in 2019 is #1 in the country
6.9% growth rate
hourly wage for warehouse workers is well below the national average.
1-4 CORRIDOR, fl
National Director, Industrial Research
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Disclaimer: The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
Pete Quinn, SIOR
National Director, Industrial Services
square feet under construction—
the second most on record.
The Greenville/Spartanburg/Anderson market continues to see massive growth in the industrial sector. The strong manufacturing base has been bolstered with increased regional distribution demand and record container volume at the South Carolina Inland Port. With heavy manufacturing exports, the South Carolina Inland Port is one of the only intermodal terminals with more export than import volume, making it a cost-effective solution for new import distribution centers. Speculative development is at an all-time high and is being rapidly absorbed thanks to robust demand. We’ve also seen significant new manufacturing investments from companies like Keurig Green Mountain, thanks to our strong manufacturing workforce and the nation’s lowest unionization rate.
Plentiful land for development, along with close proximity to the ports of Charleston and Savannah, has some calling the Greenville/Spartanburg/Anderson market the future “Inland Empire of the Southeast.” Three growing industrial fields dominate the area: automotive (anchored by BMW and Michelin), advanced materials manufacturing (supporting the specialty textiles industry serving Boeing and the automotive sector) and the logistics and distribution facilities that serve the Southeastern United States. Distribution companies are moving into the region in droves and setting up regional hubs to service a growing population. There are currently 31 million people living within 250 miles of the market’s core and this is expected to grow to 34 million by 2023.
Total POpulation Age: 18-34
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Statistics by Property Size
NEXT: I-4 CORRIDOR
Continued strong absorption dropped vacancy rates to 5.1% at year-end, 10 basis points lower than 2017 and the lowest vacancy rate in over a decade. Vacancy rates declined in all size ranges in 2018 but remain the lowest in product larger than 500,000 square feet, which finished the year at 2%. Low vacancy rates, especially in product greater than 100,000 square feet, has spurred significant development in the region and this will continue well into 2019.
The market is located near both inland and seaports. Two major Inland ports, Greer and Dillon, call the area home. Inland Port Greer opened in October 2013, extending the Port of Charleston’s reach 212 miles inland to Greer, SC, and providing shippers with access to more than 95 million consumers within a one-day drive. Norfolk Southern serves Inland Port Greer through its main rail line, and the facility is positioned along the Interstate 85 corridor between Charlotte and Atlanta, where Norfolk Southern operates additional rail yards.
Inland Port Dillon opened in April of 2018, giving cargo owners, including shippers of refrigerated cargo, a powerful new tool to optimize their supply chain. Located within a prime 3,400-acre industrial site and in close proximity to I-95, Inland Port Dillon has rail service provided exclusively by CSX.
Both distribution and manufacturing-related occupiers continue to move into the market in droves. More than 5.6 million square feet was absorbed in 2018, the second largest annual total in the past decade. Since 2014, there have been more than 21 million square feet of occupancy gains, equal to 10% of the existing inventory.
The region is blessed with a plethora of land for development. This along with robust demand is creating record breaking industrial construction. More than 3.5 million square feet of new product completed in 2018 and over the past five years, 17.8 million square feet has completed construction. New construction will pick up pace in 2019 with 6.9 million square feet currently under construction.
Rental Rates & Sales Activity:
Asking rents in the region remain some of the most economical in the country, finishing 2018 at $3.50 per square foot per year NNN. This rate is nearly $2.00 per square foot per year lower than the national average. This low rate—$3.50 per square foot per year, is actually a record high for the region, as asking rents increased nearly 8% compared with the previous year. The biggest jump in asking rents was in product 100,000 square feet and greater, which increased an average of 8.6% in 2018. As more Class A space hits the market in 2019 and demand keeps pace with the previous year, asking rents will continue to ascend, but remain much lower than the national average for the foreseeable future.
500,000 SF +
Overall Vacancy Rate
Overall Net Absorption
Asking NNN Rental
Overall Vacancy Rate 2017
Overall Vacancy Rate 2018
Asking NNN Rental Rate 2017
Asking NNN Rental Rate 2018
NEXT: LAS VEGAS
I-4 Corridor Statistics
Rental Rates & Sales Activity:
Asking rental rates continue to ascend, finishing 2018 at $6.23 per square foot per year, the highest asking rent since 2008. Rents increase the most in product smaller than 50,000 square feet in 2018 as activity was robust. As rents continue their upward trajectory and activity remaining strong, institutional capital will flow into the region in 2019, driving up sales prices and lowering cap rates in the coming quarters.
Nearly seven million square feet completed construction in 2018, the most on record. While this record amount of development was warranted, it was not enough to quench demand from occupiers, especially in buildings larger than 500,000 square feet. Because of this, a record amount of industrial inventory has broken ground with 8.4 million square feet currently under construction. Look for this pace to continue well into 2019, with average size ranges of new development rising in the coming year.
Fortune 500 occupiers continue to move into the region to service one of the fastest growing population bases in the country. In 2018, 9.2 million square feet was absorbed, significantly higher than the 5.6 million square feet absorbed in 2017. With developers closing in on breaking ground on many big-box projects, look for absorption to keep its current pace in the coming year.
The I-4 Corridor industrial market has experienced continued vacancy rate declines since the end of the recession and finished the year with a decade-low vacancy rate of 4.7%, 80 basis points lower than 2017. Vacancy rates are lowest for product 500,000 square feet and larger, which finished 2018 at 2%. The region will continue to see significant in-migration of large tenants in 2019, despite the market’s limited inventory, and will bring about increased speculative development.
The region is home to strong ground and rail freight capabilities including the CSX Integrated Logistics Center (ILC) in Winter Haven. The ILC has also been a major boon to all of central Florida’s logistics and distribution industry. This centralized transportation hub features a 318-acre terminal adjacent to 930 acres of industrial and business park space slated for use by light industrial facilities and warehouse distribution centers. The region is home to two international airports (Orlando and Tampa), both with growing cargo handling capabilities. The I-4 Ultimate Project is a 21-mile makeover—from west of Kirkman Road in Orange County to east of State Road 434 in Seminole County—that will improve truck flow throughout the area.
The I-4 Corridor industrial market is one of the fastest growing, and most dynamic industrial markets in the country. More than 21 million people live within 250 miles of the market’s core, making it an ideal location for retailers, wholesalers and 3PLs to locate. Nearby Orlando is also home to a burgeoning millennial population, making the market extremely popular for final-mile facilities. While many parts of the country struggle with labor shortages, the entire Central Florida region has an employment concentration that exceeds the national average, both foreign and domestic logistics companies benefit from a large available workforce and industry-focused educational programs including Polk State Corporate College supply chain and logistics institute and Florida Polytechnic’s concentration in Material & Supply Chain. Not only is labor readily available in the I-4 Corridor, it is also affordable with average warehouse worker wages finishing 2018 at $12.96 per hour, $1.00 an hour lower than the national average.
average hourly wage for warehouse workers is well below the national average.
The Interstate-4 Corridor stretches from the east coast in Daytona Beach, through Orlando, to the west coast in Tampa. This corridor is the heartbeat of industrial distribution throughout the state of Florida. This is driven by our rapidly growing population, central location within the transportation network and a strong labor force. Along the I-4 Corridor, users such as Amazon, Wal-Mart, PepsiCo, BestBuy, Lowe’s and many more have the ability to reach a population in excess of 14 million people within four hours. Because of this, we have seen the prevalence of speculative development significantly increase in the past three years and we foresee this trend continuing.
Executive Managing Director
Richard T. Davis
NEXT: LEHIGH VALLEY
Las Vegas Statistics
Asking rents continued an upward trajectory, finishing 2018 at $8.64 per square foot per year NNN, 5.8% higher than the previous year and the highest asking rent since 2008. With vacancy rates expected to remain low, asking rental rates will continue to ascend in the coming year. Low vacancy rates, rising asking rents and strong activity mean investment activity in the market will remain robust with higher sales prices and lower cap rates in 2019.
At the beginning of 2018, the large amount of product slated to deliver in Las Vegas was worrisome as many wondered if the market could continue to support robust amounts of speculative development. However, with superb activity the large amount of product constructed ended up warranted. There was 4.4 million square feet of completed construction in 2018. Ground breakings remained on par throughout the year and finished 2018 with 4.5 million square feet under construction.
Activity was robust in 2018 as many large tenants took advantage of the market’s growing population, economic rental rates and significant logistics assets. More than 5.1 million square feet was absorbed in 2018, bringing the total for the last 24 months to nearly 13 million square feet—equal to 10% of the total market inventory. The industries most active in occupying industrial space in 2018 were in the wholesale, transportation and warehousing, manufacturing and retail sectors. These sectors will continue to drive demand in 2019 as they all expand their footprints in the market.
Las Vegas’ second biggest year for absorption on record dropped the overall vacancy rate to 3.6% at year-end—the lowest vacancy rate on record and much lower than the recession-high vacancy rate of 14.3% in 2010. Vacancy rates dropped in all size ranges in 2018, with the exception of buildings 500,000 square feet and greater, which added some much-needed inventory and increased the vacancy rate to 4.3% from 1.1% in 2017. Look for vacancy rates to remain low in the coming year as occupiers continue to move into and expand in the market in droves.
The Las Vegas industrial market posted some of the strongest fundamentals in the country in 2018. Demand is driven by both regional distributors that are picking the region over other areas in Southern California and local businesses that are expanding because of the area’s growing economy, population, and of course, tourism. Las Vegas’ close proximity to California means that more than 26 million people live within 250 miles of the market, with more than 22% (5.9 million) of which are millennial. Population growth and the region’s many logistics advantages will make Las Vegas one of the strongest emerging industrial markets in the country in 2019.
overall vacancy rate is an all-time low for the market.
Southern Nevada’s industrial market has completed a second year of significant inventory expansion with a very low vacancy rate. Current expansion is comparable with the expansion experienced during the boom of 2005-2007. Unlike in the previous boom when new tenants were primarily headquartered locally or in California, this cycle includes national tenants primarily in the e-commerce, regional fulfillment and third-party logistics category. Current indications point to continued strong demand from both national and local tenants along with robust construction in 2019.
Senior Vice President Las Vegas
Las Vegas offers a plethora of logistics advantages from the road, rail, air and even the sea. The market is relatively close to the ports of Los Angeles and Long Beach, the two largest ports in the United States. Interstate 15 passes through Las Vegas, and Interstate 40 is nearby, giving the market close proximity to two major interstate highways. The market is serviced by the Union Pacific railroad and the McCarran International Airport is one of the fastest growing cargo airports in the country, growing more than 10% in 2017.
Las Vegas' industrial labor availability is robust, and its total population is expected to grow by 8.1% over the next five years. Labor wages remain economic with average warehouse workers in the region making $13.92 per hour, slightly slower than the national average of $13.97, but much lower than the average hourly wage of $14.72 in the Inland Empire and $14.25 in Phoenix.
Lehigh Valley Statistics
Despite the strong activity, asking rates dipped slightly to $6.13 per square foot per year in 2018. This dip was a direct result of a lack of Class A space on the market. With vacancy rates at decade lows, even Class B space will increase in demand in the coming year which will drive up the average asking rate in 2019. Institutional investors will continue to put capital into the region in the coming year, increase sales prices and driving down cap rates.
The growing demand from e-commerce occupiers to be in Lehigh Valley to service the large nearby population have kept development robust the past five years. In 2018, more than 3.2 million square feet was completed. While this didn’t match the record development in 2017, it was still an impressive number. Since 2013, nearly 26 million square feet of industrial development has completed, meaning 30% of the existing inventory in Lehigh Valley market is less than six years old. Despite the plethora of new development in the past five years, under construction increased at year-end 2018 to 4.4 million square feet. Land sites are becoming harder to find however, and many developers will start to look at redevelopments of older office and industrial product to quench demand for modern distribution facilities in the coming quarters.
Many large retailers, wholesalers and 3PLs continue to make Lehigh Valley their home. In 2018, the market posted just over 4.6 million square feet of occupancy gains, the sixth consecutive year overall net absorption surpassed three million square feet. Since 2013, the market has posted 29 million square feet of positive absorption, equal to 32% of the total market inventory. As occupiers continue to expand their footprint to service the highest populated region in the country, Lehigh Valley will continue to be a sought-after market, keeping activity robust and absorption positive in 2019.
Despite a large amount of development, overall vacancy rates decreased to 4.5% in 2018. Vacancy rates remain significantly lower when compared to the recession-high vacancy rate of 14.7% in 2008. Vacancy rates dropped in most size ranges and the biggest decline was in spaces lower than 25,000 and greater than 500,000 square feet, where there is little to no existing vacant product. Despite another year of solid deliveries expected in 2019, the continued demand in the market will keep vacancy rates low for the foreseeable future.
Lehigh Valley’s location gives occupiers close proximity to many logistics hubs. Nearby Philadelphia International Airport is one of the 20 largest cargo airports in the country. The region is also home to Lehigh Valley International Airport which was ranked the fastest-growing cargo airport in the U.S. Lehigh Valley offers access to many major roadways including the Pennsylvania Turnpike, Interstate 78 and close access to the New Jersey Turnpike. Aside from roadways, there is also proximity to the ports in New Jersey, New York, Philadelphia and Wilmington. Warehouse wages in Lehigh Valley are in line with the U.S. average at $13.97 per hour, which is lower than the $14.29 per hour average in nearby Philadelphia.
Distributors, manufacturers and 3PLs continue to move into Lehigh Valley to take advantage of logistics benefits and opportunities. Lehigh Valley is located in Northeast Pennsylvania where underdeveloped farm land and factories once stood. Lehigh Valley consists of a group of ever-expanding communities such as Allentown, Bethlehem, Nazareth and Easton. Lehigh Valley’s location gives the region’s occupiers quick access to some of the largest cities in the U.S. In fact, nearly 62 million people live within 250 miles of the market’s core, 21% of which are millennials.
people live within 250 miles of the market.
The Lehigh Valley ended 2018 with the sixth consecutive year of robust activity and we expect this to continue in the coming year. We continue to see the lowest supply in the smallest and largest size ranges in the valley. Demand for bulk facilities greater than 500,000 square feet has remained consistently strong. FedEx Ground opened its new $335 million distribution hub near Lehigh Valley International Airport. Lower supply of developable land has pushed bulk development along the I-78 Corridor west into Berks County and now east into Hunterdon County, New Jersey. We expect more infill development to commence as older office and industrial facilities are demolished for new industrial construction.
500,000 SF +
Asking rents continue to escalate in the region, finishing 2018 at $4.93 per square foot per year, the highest rent since 2009. The rise in asking rents has brought about an increase in demand from investors. Supply continues to be outpaced by demand across all industrial product types, causing sales activity and investment demand to rise. However, there appears to be less one-off industrial building sales for both investment and owner-user purposes compared to demand. While one-off buildings have been slow to come to market, there have been several value-add options that have sold in recent months. On the other side of the spectrum, the institutional and portfolio sales market has been quite active in 2018, with a number of large portfolios that have come to market and sold.
Demand for industrial space in Minneapolis/St. Paul was strongest in 2015, when the market absorbed more than four million square feet. Since then, absorption has remained solid and increased significantly in 2018, with 2.4 million square feet absorbed, significantly higher than the one million square feet of occupancy gains in 2017. As the region continues to gain in popularity with both retailers and 3PLs, look for absorption to continue its current momentum in 2019.
After peaking at more than 13% in 2010, the Minneapolis/St. Paul industrial market has enjoyed steady year-over-year drops in overall vacancy. Today, vacancy stands at 6.8%, the lowest vacancy rate in more than a decade. Vacancies declined significantly despite more than 14 million square feet of new development over the past 48 months. Product lower than 25,000 square feet and more than 500,000 square feet are the tightest in the market with vacancy rates under 2%. These size ranges represent the most opportunity for development in the coming year.
The Minneapolis/St. Paul metro area has one of the largest millennial population concentrations in the country. The Twin Cities demographics include a population of 3.7 million people within 50 miles of the market’s core, 21% of which are between the ages of 18 and 34. This demographic is creating extensive demand for online retailers, wholesalers and third-party logistics companies and making the region one of the fastest growing final-mile distribution markets in the country. Demand for industrial space is creating record low vacancy rates in the area and spurring new development, as well as redevelopments of older manufacturing locations. These redevelopments will continue in the coming year, which will be a major catalyst for the market.
people live within 50 miles of the market core, and this number is expected to grow 5% by 2023
Over the past decade, the Twin Cities have become a true “18-hour city," with services, amenities and job opportunities similar to those in the largest markets. In addition, we continue to attract top talent for our diverse industry base and consistently rank high as a prime location to live, work and play. We continue to see momentum in our marketplace for the coming year, and some challenges as well, but overall the fundamentals are very strong and demand for all product types should remain steady.
Executive VP Brokerage Services and Managing Director, Brokerage
Bill Wardwell, SIOR
With the overall market vacancy rate below the 5% threshold, brokers have noted that the frequency of multiple offers on leasable space has increased dramatically. As a result, owners across the entire market have simultaneously increased asking rates to match competitive bids. The Sacramento warehouse market has never had a higher year-over-year rent growth rate. Asking rents skyrocketed in 2018 to $7.08 per square foot per year NNN, significantly higher than the $5.16 per square foot per year asking rent in 2017 and is an all-time high for the region. Despite the significant increase in asking rents, the Sacramento market is still more economical than the East Bay and Silicon Valley industrial regions.
Despite the massive amount of activity in the market, new development remains minimal, with only 862,000 square feet completing construction. This comes off 2017 where a decade-high 1.6 million square feet was completed. Low amounts of new development should continue in 2019, with only one million square feet under construction. As more occupiers look to Sacramento to distribute product throughout Northern California, development is bound to follow. Look for ground breaking to increase in 2019 and bring much needed supply to the region.
Many large move-ins in 2018 created 3.2 million square feet of occupancy gains, a continuation of the strong occupancy gains posted in 2017, when more than 3.9 million square feet absorbed, the most absorption in over a decade. West Sacramento led all submarkets in net absorption in 2018 and will continue to be a popular destination for occupiers in the coming year.
The Sacramento industrial market, which totals 161 million square feet of existing space, continued to see vacancy rates decline in 2018. The overall vacancy rate finished the year at a decade-low 4.2%, 140 basis points lower than the previous quarter, and significantly lower than the recession-high vacancy rate of 13% in 2010.
The Sacramento industrial market is within a few hour’s drive of a plethora of logistics hubs including the Port of Oakland, the eighth largest port in the U.S., and one of the most important agricultural export ports in the country. The growing Port of Stockton is actually the third largest port in California and the largest inland port in the western U.S. Sacramento can also take advantage of four cargo airports including Oakland International Airport, the 11th largest cargo airport in the U.S., San Francisco International Airport, San Jose International Airport, and most importantly, Sacramento’s Mather Airport, a growing air freight hub in Northern California. Wages for warehouse workers are affordable for Northern California at $14.90, much lower than Oakland ($16.65) and San Jose ($16.43).
Located just 90 miles northeast of San Francisco, the Sacramento industrial market was one of the top growing industrial markets in the country in 2018. Nearly 17 million people live within 250 miles of the market’s core, making it an ideal location for retailers, wholesalers and 3PLs to locate. Sacramento is close enough to one of the largest, most affluent millennial populations in the country as well as the plethora of logistics hubs Northern California has to offer to be both a regional and final-mile industrial market. While other Northern California industrial markets struggle with labor shortages because of extremely high housing costs and low unemployment rates, Sacramento has the available personnel and housing environment to facilitate further industrial expansion and this will continue to drive the region and makes it one of the top markets to watch in the coming year.
The Sacramento industrial market continues to receive well-deserved attention from institutional developers due to historically low vacancy rates, significant rent growth, strong tenant demand and availability of developable land. With Sacramento being the fastest-growing major city in California, we have seen an influx of new residents as well as institutional capital, regional capital and out-of-market tenants. Sacramento has long been known as an agricultural center, but it is also a highly desirable industrial hub due to its access to Northern California. The capital city of the world’s fifth largest economy is a viable low cost alternative compared to nearby Bay Area markets and with current market fundamentals, we will see a wave of new speculative developments completed in 2019.
Tommy Ponder, SIOR
NEXT: SEATTLE/PUGET SOUND
rental Rates & Sales Activity:
Rental rates finished 2018 at $4.00 per square foot per year NNN for the small amount of product vacant on the market. Excellent fundamentals will keep investors streaming into the market for the foreseeable future which will drive up sales prices and lower cap rates in the coming year.
More than 2.9 million square feet of industrial product completed in 2018. While this pace is impressive, it pales in comparison to the record 9.3 million square feet under construction. While this a robust amount, a majority of this space is preleased with only 4.9 million square feet unaccounted for at the time of this report.
With nearly no available existing space on the market, and many of the projects under construction delivering late 2018 or early 2019, there have been a limited number of leasing transactions in 2018. Some large move-ins in 2018 include GoPlus, Home Furniture International, Keen Transport, Floor & Décor and Shaw moved into its one million square foot building developed by CRG at Northport.
The overall vacancy rate finished 2018 at a national low of 0.7% in 2018. There is a small amount of vacant space in product smaller than 100,000 square feet, which finished the year at 2%, but there is currently no vacant space larger than 100,000 square feet.
Savannah is the fastest-growing industrial market in the country because of its excellent logistics advantages and because it is one of the last U.S. seaport markets with land available for development. More than 24 million people live within 250 miles of Savannah and this is expected to grow 5.5% by 2023.
(absorption as a % of inventory) in 2018 is #1 in the country
With the combination of sustained port growth and lack of available space, developers have taken action with a record amount of space under construction. Developers such as Duke Realty, Centerpoint Properties and Scannell Properties are all expanding their portfolios. Current market conditions have also attracted several new developers including MDH, CTR (Crane Transportation Realty), Capital Development Partners, Chesterfield, Rooker with Solution Property Group, McCraney and PNK, all of which are delivering or recently delivered buildings within 10 miles of the Port. Between existing market tenants discussing expanding and newcomers circling, 2019 should be an interesting year for the Savannah market.
David Sink, SIOR
100,000 SF +
NEXT: SHENANDOAH VALLEY/I-81 CORRIDOR
Seattle/Puget Sound Statistics
Rental Rates & Sales Activity:
Asking rental rates remained stable finishing 2018 at $10.04 per square foot per year. While this rate is nearly double the national average, occupiers remain willing to pay to be located in this key logistics market. High asking rents and strong activity have kept investor interest high and this will continue well into 2019 as the Seattle/Puget Sound market will be one of the most sought-after markets for institutional investment.
Led by Georgetown Crossroads, new development surged in 2018 with a decade-high five million square feet completing construction—an impressive amount for a market that was considered in-fill just a year ago. Pierce County continues to see a majority of new development in the region with 94% of new construction in Q4 2018 completing there. New development will remain strong in 2019 with an additional five million square feet under construction. With more new inventory hitting the market in 2019, absorption will again be robust and will be one of the major reasons why Seattle/Puget Sound will be a market to watch in the coming year.
For the first time since 2015, the Seattle/Puget Sound market saw four straight quarters of positive absorption as Q4 2018 recorded 475,791 square feet of positive results. The region finished the year with just shy of four million square feet of total absorption—more than triple 2017’s result. Major Q4 2018 tenant move-ins included Damco Distribution Services at Lakewood Tacoma Logistics Center in Lakewood, Raymond Handling Concepts at North Auburn Logistics in Auburn and Clutter at Des Moines Creek Business Park in SeaTac. Pierce County tenants fueled absorption in the fourth quarter with 203,826 square feet of space occupied, followed by Kent Valley with 168,613 square feet.
The market added much needed vacant inventory in 2018 with overall vacancy rates increasing to 4.1%, 150 basis points higher than the previous year. Vacancy rates increased the most in spaces greater than 100,000 square feet, where much needed inventory was added through new development including the Prologis Georgetown Crossroads in Seattle, a first-of-its-kind, three-story warehouse totaling 589,615 square feet which completed construction in Q4 2018.
The Northwest Seaport Alliance, which includes the ports of Seattle and Tacoma, is the United States' fifth-largest container gateway. The Northwest Seaport Alliance delivers less congestion, compared with its California counterparts, closer proximity to Asia, deeper ties to Alaska, as well as award-winning ease of doing business. The area’s natural deep-water harbors and ability to handle a wide range of cargo make the Puget Sound market ideally suited to meet the growing needs of Pacific Rim trade.
Situated in the economic powerhouse of the Pacific Northwest, Seattle is one of the fastest-growing cities in the nation, making it a popular industrial market for both regional and final-mile distribution. The Seattle/Puget Sound industrial market boasts low vacancy rates and a short supply of large, close-in industrial sites. With insatiable demand, the Seattle/Puget Sound market is poised to continue its current pace and see an increase in re-developments and be an epicenter of multi-story warehouse development in the coming years.
square feet of new construction in 2018, the most in a decade
The Seattle industrial market continues to be one of the best in the country. Tenant demand continues to be strong, and the institutional demand to own product in the Seattle market is at an all-time high. We expect another strong year in 2019.
Executive Vice President
NEXT: ST. LOUIS
Asking rental rates continue to ascend, finishing 2018 at $4.27 per square foot per year NNN, and a $0.20 per square foot per year increase compared with the previous year. This is also the highest asking rate in over a decade. Despite the rapid ascension, asking rates still remain over $1.00 per square foot per year lower than the national average.
Development has remained steady in the region over the past years, hovering around the one million square feet range. 2018 surpassed that slightly, finishing the year with 1.8 million square feet of new development, a decade high. 2019 will be a record year for new construction with 3.3 million square feet slated to complete.
2018 saw an all-time record 3.4 million square feet absorbed, significantly higher than the 1.4 million square feet that absorbed in 2017. Over the past five years, 9.7 million square feet has absorbed, which is greater than 10% of the current existing stock. With a plethora of new development slated to complete in 2019, net absorption is projected to get close to or possibly surpass its record levels in 2018.
The Shenandoah Valley/I-81 Corridor industrial market, which totals 93 million square feet of existing space, saw vacancy rates drop in 2018 to a decade-low 4.3%. Vacancy rates dropped an impressive 220 basis points compared with the previous year thanks to strong activity in product smaller than 100,000 square feet. Despite a large amount of development planned for 2019, vacancy rates will remain below 5% as activity is projected to remain strong.
The Shenandoah Valley/I-81 Corridor is a cost-effective alternative to markets further north in the Lehigh Valley and central Pennsylvania. The Port of Baltimore and the Port of Virginia provide rail access through CSX and Norfolk Southern, respectively. Combined with access to labor markets in Virginia, Maryland and West Virginia, these factors make the area particularly attractive to employers. The Shenandoah Valley region offers a plethora of advantages including land available for development and proximity to the metro Washington, D.C., Baltimore and Ohio Valley population bases. The market can reach one of the largest population concentrations in the country, as nearly 40 million people live within 250 miles of the market’s core.
square feet of net absorption in 2018, an all-time record.
Shenandoah Valley/I-81 Corridor
Speculative development has arrived to the I-81 Shenandoah Valley Corridor with many projects either underway or in the pipeline for 2019. Prominent developers new to the market are leading the charge and will serve to transform this growing logistics market from a secondary to a primary market. The demand driver is the close proximity to both metropolitan Washington, D.C. and Baltimore as well as being close to the Virginia Inland Port and the Port of Baltimore. 2019 will be another year of growth for this region, which anchors the northern end of an industrial crescent that stretches through greater Richmond and the I-95 markets to Hampton Roads and the Port of Virginia. We expect this growth to be driven by both the user and developer communities who continue to discover the I-81 Shenandoah Valley Corridor.
Executive Vice President
500,000 SF +
Shenandoah Valley/I-81 Corridor Statistics
St. Louis Statistics
Asking rental rates reached an all-time high at year-end, finishing 2018 at $4.86 per square foot per year NNN, on par with the previous year. As vacancies are projected to decrease in the coming year, asking rents should increase. This combination of factors will bring more interest from institutional capital, increasing sales prices and lowering cap rates in the market.
With the growing demand from e-commerce occupiers comes an increased demand for new development. In 2018, more than four million square feet of industrial product completed—the second consecutive year new development reached this mark. Continued strong demand has pushed ground breaking to new heights with a record 5.2 million square feet under construction at year-end.
Many large occupiers chose to locate in the St. Louis industrial market in 2018. These large move-ins contributed to nearly four million square feet of occupancy gains in 2018, the eighth consecutive year absorption was positive in the region. Expect activity to increase in the coming year across all sizes as occupiers move into the plethora of newly developed inventory, taking advantage of the markets’ robust logistics offerings.
Vacancy rates remained low in 2018 despite robust new construction. The overall vacancy rate finished 2018 at 6.3%, a 0.5 percentage point decline compared with 2017 and significantly lower than the recession-high vacancy rate of 10.4% in 2010. While activity is expected to remain strong in the coming year, the projected increase in new development will keep vacancy rates stable for the foreseeable future.
The Port of Metropolitan St. Louis (PMSL) encompasses 70 miles and includes both sides of the Mississippi river. The Port is the northernmost ice and lock-free port on the Mississippi and is served by six Class I railroads, seven interstate highways and two international airports Nearly one-third of the U.S. population is located within 500 miles of the port. In addition to the Port of St. Louis, the St. Louis Lambert International Airport is a growing cargo hub, with total cargo volumes increasing by more than 5% each of the past two years.
The St. Louis market epitomizes the growth in secondary industrial markets the past few years because of e-commerce. The market is centrally located and is home to one of the biggest freight rail networks in the country. Because of this, the market has seen many e-commerce companies take large blocks of space. As the need to get products to consumers increases in the coming years, St. Louis is one of the best situated industrial markets to take advantage.
St. Louis continues to be a sought-after location for big-box distribution with significant additions of new e-commerce and 3PL-operated space. New spec industrial developments by Exeter Property Group, NorthPoint Development, Duke Realty and Panattoni are providing significant space alternatives for new tenants in this market. The market’s central location and strong rail network are contributing to strong leasing activity and net absorption and this will continue into 2019. This is true in both tax abated and non-tax abated areas. Developers are continuing to build new spec product and pursue land for development to satisfy this continuing absorption.
Senior Vice President
Geoffrey R. Orf, SIOR