In a recent study by the National Real Estate Investor, 44 percent of respondents said that the industrial sector’s expansion phase has at least 12 more months. With another 33 percent saying it will last 12 to 24 months.
One of the key drivers of industrial growth is the explosion of retail fulfillment needed to support e-commerce and delivery. There are a handful of markets where this growth is noticeable to the naked eye, and by the data.
Below are some of the top, booming industrial markets in the west.
Some of Arizona’s top-performing industries include bioscience and healthcare, manufacturing and technology and innovation, according to Arizona Commerce Authority. These industries are leading the demand for industrial in the Grand Canyon state.
We’ve been tracking the Phoenix industrial real estate market’s performance for some time, and our findings in Q1 2019 only further reflected the consistent demand this market has shown cycle after cycle. “Vacancy rates hit an all-time record low and asking rental rates soared to a new high. Leasing and sales activity continues to remain on solid footing, bolstered by a growing consumer base driving demand for industrial space among e-commerce and third-party logistics companies.”
Oakland/East Bay, California
Although Oakland and the East Bay carry some of the most expensive industrial rental prices in the country, it has not hindered the regions exponential industrial growth.
The “East Bay’s industrial property market (aka I-880 corridor) continued the trend of delivering significant amounts of a new product that began in 2018. Demand for warehouses, distribution centers, and logistics centers in the East Bay that has blossomed out of the e-commerce boom has shown no signs of letting up. Even with all of the new deliveries and a rare quarter of significant negative net absorption, vacancies remain below 5% and overall rental rates are up 8.4% year-over-year. The East Bay industrial property market has become a hub for commerce throughout the Bay Area, and will continue to be attractive to distribution and logistics tenants going forward.”
Portland is not only one of the top performing industrial markets of the west coast, but it’s also one of the most exciting markets in the country.
“The Portland industrial market has started the year by delivering an impressive amount of new industrial product, with over 400K s.f. of new inventory added. Strong fundamentals in the industrial sector have kept vacancy low in spite of all the new inventory added. Furthermore, rental rates managed to post a respectable 3.08% increase quarter-over-quarter. With roughly 1.8M s.f. of mostly high-quality logistics product still under construction at quarter’s end, the outlook for Portland’s industrial market remains bullish going into the second quarter of 2019.”
Seattle’s industrial boom is due to a lot of factors, but primarily the Northwest Seaport Alliance, which is the fourth largest container operation in the country.
“The Puget Sound region’s industrial market 1st quarter results are starting off in a pattern similar to a year ago. Last year, the region saw negative net absorption of just under 500,000 s.f. This quarter, the results were also negative, but a lower amount of nearly 110,000 s.f. Construction is very active at just over 5.8 million square feet With the high volume of construction and the negative net absorption, is there a reason for concern? The answer is no. We do expect some correction at some point in time, but there are several factors that point to continued growth in the industrial market.”
“Direct vacancy for the fourth quarter in the Reno industrial market rate rose 100 BP to 5.58%, even though the quarter recorded 443,640 square feet of positive net absorption. Overall vacancy also grew from 6.01% to 6.40%. These overall and direct vacancy increases are a function of new construction deliveries and approximately 726,938 square feet of sublease space added to the market.”
Overall, the outlook across the western United States remains strong for the year (and for many years) to come.
For a more in-depth look into the industrial markets in these and other western cities, read our industrial market reports.