Back To School: Q2 2024 Industrial Review

With the turn of each quarter, we gain the opportunity to reflect on market performance. This allows investors to develop a more comprehensive understanding of the markets they are currently invested in, as well as to identify potential target markets for future expansion. For this review, we have gathered data from the top industrial markets with asset values exceeding $10 billion as defined by CoStar¹. Hartford, CT has newly qualified for this list, bringing the total number of markets under consideration to 64.

Market Rent Growth

The average market rent growth has continued to slow as evident by the 4.88% growth over the past year and 0.52% growth over the past quarter (2.08% annualized). Additionally, looking back to our Q1 2024 Review, last quarter’s year-over-year growth average was at 6.07%. Top market rent growth over the past quarter was led by Milwaukee at 2.15%, more than quadruple the average, followed by Cleveland, Baltimore, Boston, and Richmond. There were significant market rent decreases over the past quarter in Los Angeles, Austin, and the Inland Empire, with decreases at 2.04%, 1.51%, and 1.21% respectively. Over the past year, Richmond was the only market to achieve rent growth more than double the average at 9.89%. The proceeding top growing markets were Orlando, Tampa, Baltimore, and Columbus. Los Angeles was the only market over the past year to have an overall decrease in market rent at 1.21%. According to CoStar data, this quarter was the 9th consecutive with a negative 12-month net absorption, meaning for the past nine quarters, more spaces have been vacated than newly occupied in the Los Angeles market, which could have pushed owners to begin lowering asking rents.

Quarter-over-Quarter

1. Milwaukee, WI +2.15% [+$0.15/SF]
2. Cleveland, OH +1.86% [+$0.12/SF]
3. Baltimore, MD +1.85% [+$0.21/SF]
4. Boston, MA +1.74% [+$0.28/SF]
5. Richmond, VA +1.49% [+$0.14/SF]

Year-over-Year

1. Richmond, VA +9.89% [+$0.86/SF]
2. Orlando, FL +9.59% [+$1.23/SF]
3. Tampa, FL +9.03% [+$1.06/SF]
4. Baltimore, MD +8.64% [+$0.92/SF]
5. Columbus, OH +8.20% [+$0.62/SF]

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Inventory Growth

Inventory growth across the top markets have remained relatively similar to the previous quarter. The average inventory growth over the past year was 2.86% with growth over the last quarter at 0.58% (2.32% annualized). The top growing markets by inventory over the quarter were Charleston, Phoenix, Austin, Las Vegas, and Palm Beach. One notable exception from the top was Savannah, which has showed a significant slow in construction, but is still well above average inventory growth at 1.59% over the quarter. While Savannah still continues to dominate inventory growth over a year timespan, it is showing signs of a steady decline. The other markets at the top of inventory growth over the past year are Phoenix, Austin, Charleston, and Las Vegas, which are all well above double the average growth.

Quarter-over-Quarter

1. Charleston, SC +2.88% [+3.1M SF, +10 Buildings]
2. Phoenix, AZ +2.45% [+11.3M SF, +55 Buildings]
3. Austin, TX +2.34% [+3.5M SF, +53 Buildings]
4. Las Vegas, NV +2.11% [+3.8M SF, +19 Buildings]
5. Palm Beach, FL +1.81% [+1.3M SF, +5 Buildings]

Year-over-Year

1. Savannah, GA +18.59% [+20.5M SF, +45 Buildings]
2. Phoenix, AZ +10.49% [+45.0M SF, +214 Buildings]
3. Austin, TX +9.02% [+12.8M SF, +198 Buildings]
4. Charleston, SC +8.45% [+8.7M SF, +29 Buildings]
5. Las Vegas, NV +7.24% [+12.5M SF, +65 Buildings]

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Vacancy Rate Change

While vacancy continues to steadily increase across most markets, the rate change has shown signs of slowing with the average change at 1.94% over the past year and 0.42% (1.68% annualized) over the last quarter. The top five markets with a decrease in vacancy compared to the previous quarter were Kansas City, San Antonio, Cleveland, Grand Rapids, and Louisville. Three markets stood out with a significant increase in vacancy compared to the previous quarter; these markets were Charleston, Reno, and Harrisburg, at 3.05%, 2.46%, and 1.86% increases, respectively. For Charleston and Reno, this correlates with high inventory growth over the quarter. Harrisburg’s increase could correlate with some large move-outs in the market leading to a 12-month net absorption of negative 2.6M square feet. The only top markets with decreasing vacancy over the past year were Providence, Jacksonville, Worcester, Grand Rapids, and Honolulu. Markets with significant growth in vacancy were all at the top of inventory growth over the same timespan; those markets being Savannah, Charleston, Phoenix, and Reno, at 9.38%, 6.56%, 5.84%, and 5.73% increases, respectively.

Quarter-over-Quarter

1. Kansas City, MO -0.43%
2. San Antonio, TX -0.35%
3. Cleveland, OH -0.32%
4. Grand Rapids, MI -0.24%
5. Louisville, KY -0.24%

Year-over-Year

1. Providence, RI -0.35%
2. Jacksonville, FL -0.31%
3. Worcester, MA -0.08%
4. Grand Rapids, MI -0.07%
5. Honolulu, HI -0.00%

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Industrial Employment Growth

Industrial employment has grown in most top markets over the past quarter with average growth at 0.34% (1.36% annualized). The top growing markets were Las Vegas, Reno, Phoenix, Tampa, and Palm Beach. Florida markets showed strength this quarter, holding positions 4 to 9. Over the previous year, the average industrial employment growth was 1.43% with top growing markets being Honolulu, Miami, Reno, Las Vegas, and Palm Beach.

Quarter-over-Quarter

1. Las Vegas, NV +1.05% [+1.2K Employees]
2. Reno, NV +0.96% [+0.5K Employees]
3. Phoenix, AZ +0.95% [+3.1K Employees]
4. Tampa, FL +0.78% [+1.3K Employees]
5. Palm Beach, FL +0.65% [+0.4K Employees]

Year-over-Year

1. Honolulu, HI +7.14% [+2.6K Employees]
2. Miami, FL +6.56% [+6.7K Employees]
3. Reno, NV +5.75% [+2.9K Employees]
4. Las Vegas, NV +5.67% [+6.3K Employees]
5. Palm Beach, FL +5.55% [+3.6K Employees]

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Population Growth

The population growth rate of these top markets slightly increased this quarter with average growth at 0.20% (0.80% annualized) over the previous quarter and 0.70% over the last year. The markets seeing the highest population growth quarter-over-quarter were Austin, Orlando, New York, Palm Beach, and Salt Lake City, each over double the average growth. Markets with the highest growth year-over-year were Austin, Orlando, Raleigh, Jacksonville, and Charlotte. One slightly decreasing market was Hartford, the newest edition to the top market list. Population counts are estimates and should be considered with a grain of salt.

Quarter-over-Quarter

1. Austin, TX +0.47% [+11.8K]
2. Orlando, FL +0.42% [+12.1K]
3. New York, NY +0.41% [+59.6K]
4. Palm Beach, FL +0.41% [+6.3K]
5. Salt Lake City, UT +0.40% [+5.1K]

Year-over-Year

1. Austin, TX +1.95% [+48.0K]
2. Orlando, FL +1.81% [+50.8K]
3. Raleigh, NC +1.68% [+25.3K]
4. Jacksonville, FL +1.66% [+28.3K]
5. Charlotte, NC +1.65% [+45.6K]