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Future Bright for Industrial Real Estate, Says CommercialEdge

Industrial real estate continues to see strong rent growth and high demand, driven by pandemic-prompted online shopping trends. Industrial rents averaged $6.44 per square foot in January, a 5.1% increase over the last 12 months, according to a new CommercialEdge Industrial National Report.

Even as COVID-19 vaccinations ramp up, demand for industrial is expected to stay strong. New leases signed in 2020 often included premium pricing, with the average rental rate for new leases signed in the last 12 months at $7.50 per square foot. The average vacancy rate was 6%. Continued demand for industrial space will sustain rent growth and drive vacancy rates lower, the report said.

“We expect that demand will continue to increase even if e-commerce does not match its blistering 2020 growth rate. E-commerce has a continued role to play, and last year likely signaled a structural shift in consumer preferences more than temporary changes in behavior. Retail as we knew it has changed, and in its place warehousing and distribution have increased in importance,” said analysts. An improving global economy, ramped-up trade volume and inventory replenishment for retailers will be additional drivers.

The fourth quarter of 2020 now has the highest sales volume of any quarter since parent Yardi Matrix began collecting industrial data, with $11.9 billion of sales completed. Properties fetched an average price per square foot of $100, an 18.2% increase year-over-year.

 

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