q4 2021 us industrial market overview - transwestern
TRANSCRIPT
Fourth Quarter 2021
COMMERCIAL REAL ESTATE
U.S. MARKET | INDUSTRIAL
U . S . M A R K E T | I N D U S T R I A L | Q 4 2 0 2 1
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
0100200300400500600700800
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
U.S. TRENDLINES
5-Year Trend Current Quarter
VACANCY
U.S. HIGHLIGHTS
4.3%Lowest level in nearly 25 years
ECONOMY
• The December job report was good overall, though the headline number of 199,000 jobs added was less than half of what was anticipated.
• Nearly 1 million industrial-using jobs were added during the past 12 months.
• As consumers remained flush with savings, retail sales continued higher before cooling in December.
• Ports continued to set cargo volume records as holiday goods were shipped earlier than usual in anticipation of continued backlogs.
INDUSTRIAL MARKET
• Records continued to be shattered across just about every key performance indicator.
• Over 650 MSF of net absorption was accumulated during 2021– smashing the record of 431 MSF set in 2018 and more than double 2020.
• Vacancy fell by nearly 100 basis points during 2021, recording its lowest rate in nearly 25 years.
• Less than 100 MSF was delivered to the market for only the second time in the past nine quarters.
• Product under construction increased by 46% during 2021, surpassing 700 MSF just three quarters after breaking the 500 MSF barrier.
• Rents were higher in every market tracked and increased at the highest pace for a calendar year since 2019, boosted by 20% growth in five markets.
LOOKING AHEAD
• Supply chain issues will continue to fuel the need for increased storage of goods and empty containers.
• Reshoring/onshoring has accelerated due to COVIDand is expected to continue, good news for a manufacturing sector with ample room for growth.
• Industrial real estate could be a strong investment hedge against much-anticipated high inflation.
VACANCY VS ASKING RENT
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Average Asking NNN Rent (PSF) Vacancy
NET ABSORPTION (MILLION SF)
UNDER CONSTRUCTION (MILLION SF)3 Yr Qrtly Avg 515.7 MSF 5 Yr Qrtly Avg 458.3 MSF
3 Yr Qtrly Avg 102.8 MSF 5 Yr Qtrly Avg 104.2MSF
NET ABSORPTION 162.9 MSFAnnual absorption annihilates record
ASKING RENT$7.20 PSFGrowth accelerated across the country
UNDER CONSTRUCTION
713.3 MSFRecord levels across the nation
YTD
UNEMPLOYMENT RATE
3.9%Slight hiring gains, wages increased
RETAIL SALES GROWTH
0.0%No quarterly change, but up 17% YoY
U.S. HISTORICAL
O V E R V I E W
U . S . M A R K E T | I N D U S T R I A L | Q 4 2 0 2 1
05
10152025303540455055
NET ABSORPTIONQ4 2021 Net Absorption
VACANCY/CONSTRUCTION ASKING RENTS
Trailing 4-Qtr Net Absorption Q4 2021 Under Construction
Q4 2021 Vacancy Rate
Year-Over-Year Rent Growth
Q4 2021 Asking Rate NNN
0 2 4 6 8 10 12 14
Denver
Indianapolis
Phoenix
New Jersey
Columbus
Inland Empire
Chicago
Houston
Dallas-Fort Worth
Atlanta
0 5 10 15 20 25 30 35 40 45 50
Indianapolis
Philadelphia
Los Angeles
New Jersey
Phoenix
Houston
Inland Empire
Chicago
Atlanta
Dallas-Fort Worth
$0 $5 $10 $15 $20
U.S. Average
Northern Virginia
Miami
Seattle
San Jose-Silicon Valley
District of Columbia
East Bay-Oakland
Long Island
Orange County
Los Angeles
San Diego
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
U.S. Average
Orange County
Tampa
Las Vegas
Seattle
Miami
Philadelphia
New Jersey
Baltimore
Los Angeles
Inland Empire
Millions SF
Millions SF PSF
Millions SF
T O P - R A N K E D M A R K E T S B Y I N D I C A T O R S
U . S . M A R K E T | I N D U S T R I A L | Q 4 2 0 2 1
NET ABSORPTION
MARKET EXPANSION: 3 YEAR NET ABSORPTION % STOCK
K E Y P E R F O R M A N C E I N D I C A T O R S
• Positive annual and quarterly net absorption were reported in almost all markets as industrial space needs continued to grow.
• Net absorption was higher in 2021 for over 88% of tracked markets compared to their 3-year average.
• Here we consider 3-year net absorption as a percent of stock. A higher percentage indicates that a market is more expansionary.
• In addition to the Inland Empire and Lehigh Valley, historically considered preferred locations for industrial users, markets experiencing the strongest growth are located within the Sun Belt, including Savannah, Las Vegas, Austinand Phoenix.
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U . S . M A R K E T | I N D U S T R I A L | Q 4 2 0 2 1
RENTAL RATES (NNN)
RENTAL RATE CHANGE
K E Y P E R F O R M A N C E I N D I C A T O R S
• Markets with the highest rental rates were located on the West Coast, and near Washington, D.C., and New York.
• The Inland Empire and Los Angeles are among the more expensive markets, yet were the top two markets for rent growth, both experiencing growth of approximately 22%.
• Over 75% of tracked markets saw rental growth for the year surpass 5%, with all increasing over the past 12 months.
• Five markets saw rental growth exceed 20% over the past year: Inland Empire, Los Angeles, Baltimore, New Jersey and Philadelphia.
• A few of the markets with low rental-rate changes may be reacting to recent strong supply (e.g., Nashville, Savannah).
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Rental Rate T12 Percent Change Deliveries T12 as a Percent of Stock
U . S . M A R K E T | I N D U S T R I A L | Q 4 2 0 2 1
CONSTRUCTION PIPELINE
AVAILABILITY
K E Y P E R F O R M A N C E I N D I C A T O R S
• Many coastal markets where the busiest U.S. container ports are located reported the lowest availability as a percent of stock.
• Markets seeing the largest increases in availability include Raleigh-Durham and Phoenix – both of which also have higher than average overall availability as a percent of stock.
• Those registering the largest decreases in availability include Las Vegas, Cincinnati and San Diego.
• Under construction stock is indicative of future expansion.
• Savannah and Austin are growing relatively quickly with under construction stock exceeding 10%.
• Growth in the Sun Belt is evidenced here, as Savannah, Charleston, Phoenix and Raleigh-Durham have seen the most acceleration of under construction SF as a percent of stock over the past year.
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U . S . M A R K E T | I N D U S T R I A L | Q 4 2 0 2 1
MarketInventory
Square FeetOverall
Vacancy Rate Direct
Vacancy RateNet
Absorption12-Month
Net AbsorptionAsking Rent
NNNAnnual Rent
ChangeUnder
Construction
Atlanta 714,015,673 3.2% 3.0% 12,269,107 35,759,773 $5.74 7.1% 31,125,547
Austin 104,449,518 4.1% 3.8% 1,164,429 9,400,411 $11.75 6.0% 11,667,629
Baltimore 230,577,044 8.0% 7.8% 2,646,521 3,624,130 $8.27 21.3% 4,200,904
Boston 331,085,172 4.4% 4.3% 993,495 2,871,549 $10.92 9.5% 5,531,545
Charleston 79,746,181 4.1% 3.6% 35,757 3,726,291 $6.21 6.9% 8,191,654
Charlotte 324,538,835 6.0% 5.7% 2,198,308 5,011,398 $5.67 5.0% 10,867,194
Chicago 1,337,007,483 5.4% 5.2% 5,998,067 34,715,494 $6.34 9.3% 30,281,969
Cincinnati 322,686,460 4.6% 4.4% 3,403,516 8,977,879 $4.62 4.3% 3,012,933
Cleveland 329,089,739 4.6% 4.2% 604,737 632,505 $4.60 8.0% 1,518,836
Columbus 307,421,931 3.7% 3.5% 5,289,322 14,973,898 $4.52 6.9% 15,922,749
Dallas-Fort Worth 964,402,499 5.6% 5.3% 11,626,935 45,649,481 $6.04 7.7% 52,866,445
Denver 240,944,026 5.8% 5.5% 3,772,016 6,607,372 $9.74 8.8% 11,476,935
Detroit 571,403,190 4.4% 4.2% 1,995,862 10,035,028 $6.74 6.5% 9,469,785
District of Columbia 9,136,843 5.2% 5.2% 10,364 81,245 $13.79 5.1% 0
East Bay-Oakland 196,020,181 3.9% 3.6% 2,595,404 5,775,300 $14.08 14.3% 2,534,058
Greensboro 285,023,520 3.3% 3.2% 1,966,725 2,525,727 $4.29 9.4% 6,049,201
Houston 673,554,479 7.0% 6.8% 9,662,265 28,486,862 $7.72 2.5% 16,702,908
Indianapolis 346,655,204 3.7% 3.4% 4,196,449 16,580,187 $4.55 4.1% 24,611,703
Inland Empire 663,615,068 1.6% 1.4% 5,700,801 32,195,100 $11.25 22.1% 24,247,099
Jacksonville 134,599,613 3.7% 3.4% (21,346) 4,524,924 $6.09 7.6% 5,803,481
Kansas City 303,710,350 4.8% 4.6% 2,734,004 9,688,250 $4.79 4.1% 10,982,653
Las Vegas 141,142,221 2.5% 2.3% 2,761,096 8,995,081 $9.87 16.0% 8,094,469
M A R K E T S U M M A R I E S
U . S . M A R K E T | I N D U S T R I A L | Q 4 2 0 2 1M A R K E T S U M M A R I E S
MarketInventory
Square FeetOverall
Vacancy Rate Direct
Vacancy RateNet
Absorption12-Month
Net AbsorptionAsking Rent
NNNAnnual Rent
ChangeUnder
Construction
Lehigh Valley 144,899,726 4.5% 4.1% 625,673 10,067,465 $7.39 13.3% 5,337,574
Long Island 154,499,493 3.5% 3.2% 224,452 2,061,282 $14.72 14.6% 1,823,472
Los Angeles 852,117,567 1.6% 1.5% 3,005,122 18,029,940 $16.83 21.9% 4,688,459
Miami 231,808,747 2.7% 2.5% 1,566,529 6,047,479 $12.72 19.2% 3,682,317
Milwaukee 244,352,094 3.3% 3.3% 1,948,563 5,237,820 $4.54 2.9% 2,730,908
Minneapolis 380,004,691 3.3% 3.1% 2,011,009 4,989,952 $5.78 4.0% 5,038,640
Nashville 229,257,250 3.5% 3.1% 2,051,916 10,304,114 $6.88 3.9% 9,497,443
New Jersey 751,804,929 2.5% 2.3% 4,771,597 18,461,709 $10.82 20.9% 13,897,757
Northern Virginia 112,454,705 4.1% 3.9% 123,133 2,997,244 $12.52 9.8% 2,974,678
Orange County 272,145,740 2.1% 1.9% 413,440 3,860,184 $15.86 15.6% 2,198,746
Orlando 168,171,012 3.7% 3.5% 2,080,404 6,233,468 $8.29 14.0% 2,669,477
Philadelphia 546,368,519 4.2% 4.0% 2,626,893 17,152,987 $8.36 20.1% 21,086,301
Phoenix 364,742,781 5.1% 4.9% 4,657,030 21,903,936 $8.29 8.1% 34,958,844
Raleigh-Durham 127,487,495 3.4% 3.3% 731,034 2,368,819 $9.11 8.8% 8,182,402
San Antonio 135,880,608 5.3% 5.1% 1,738,961 4,650,143 $7.32 8.3% 10,174,866
San Diego 181,430,038 3.4% 3.2% 2,397,117 8,462,035 $18.04 4.9% 2,349,577
San Jose-Silicon Valley 85,171,210 3.3% 3.0% 1,066,946 2,048,355 $13.76 1.3% 924,471
Savannah 77,866,308 3.5% 2.9% 2,918,795 8,990,448 $5.15 5.1% 17,193,828
Seattle 311,501,486 4.6% 4.3% 2,467,134 7,836,984 $13.73 18.3% 8,565,161
St. Louis 299,561,950 4.0% 3.7% 694,154 7,987,525 $5.28 13.5% 8,486,513
Suburban Maryland 106,365,231 5.3% 5.1% 516,863 2,745,665 $11.73 12.4% 3,364,403
Tampa 181,564,568 3.7% 3.5% 3,312,277 6,058,491 $7.36 15.9% 5,016,870
U . S . M A R K E T | I N D U S T R I A L | Q 4 2 0 2 1
RESEARCH METHODOLOGYThe information in this report is a compilation of single and multi-
tenant industrial and flex properties located in select U.S.
metropolitan areas. Government-owned buildings are excluded
from analysis. All rents are reported as triple net.
Copyright © 2022 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.
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FOR MORE INFORMATION
Matthew DollyResearch Director | Research [email protected] 947 9244
Elizabeth NortonSr. Managing Director | Research [email protected] 775 7026
Laura HaltomManager | Data [email protected] 889 4087