DFW Leads U.S. With Whopping 14% Industrial Rent Jump
The industrial real estate sector took a few hits after the coronavirus crisis broke out in March, but now most of the historically strongest industrial markets in the U.S. are seeing a steady stream of demand and healthy price trajectories, a new industrial report from Transwestern says.
At the top of the heap is Dallas-Fort Worth, where rents on active listings have risen a blistering 14% year-over-year and net absorption rose 2.9%.
Transwestern highlighted 11 elite industrial markets, all of which have shown ongoing demand for big-box distribution assets and logistics and manufacturing spaces.
These elite regions are Dallas, Houston, Atlanta, Chicago, Lehigh Valley (Pennsylvania/New Jersey), New Jersey, Northern California, Seattle, South Florida, Southern California and Washington/Baltimore.
Spurred along by growing e-commerce and last-mile demand, all of these regions scored well when measured on rent growth, absorption of industrial space and the speed of their industrial construction pipeline.
Seven of the 11 markets recorded average year-over-year rent growth of at least 3.9%, and DFW, New Jersey, Washington-Baltimore and Lehigh Valley recorded rent growth rates above 5%.
Transwestern's rent growth data for this report came from active triple-net industrial/flex listings, which represent a small sample size of the full industrial market and thus are more sensitive to the quality and type of space on the market. The real rent growth most landlords are seeing is smaller, 2.3% year-over-year in DFW, according to Transwestern's DFW Q2 2020 industrial report.
The construction of new industrial assets also remains strong in the elite 11 industrial markets, with three of the regions, Dallas, Atlanta and Southern California, recording more than 20M SF of industrial space under construction.
The Federal Reserve Bank of Dallas brought more positive news to the Texas industrial sector Tuesday, releasing a manufacturing survey that shows factory activity expanded for the third month in a row during August.
The Fed report also shows an index measuring statewide manufacturing activity came in at 13.1, down a bit from July, but still showing tepid growth. The index is calculated by subtracting the number of companies seeing a decrease in activity by the companies reporting an increase. Any number above zero indicates overall growth in activity, while numbers below zero indicate a broad decrease in business.
The new orders index also grew three points to 9.8 as the growth rate of orders index grew by more than 10 points to 11.8, the Federal Reserve Bank of Dallas said.
"Perceptions of broader business conditions improved in August," the bank wrote. "The general business activity index turned positive after five months in negative territory, coming in at 8.0. The company outlook index registered a third consecutive positive reading, shooting up 11 points to 16.6, its highest reading in nearly two years. The index measuring uncertainty regarding companies’ outlooks remained positive but retreated to 8.2."
The labor market also showed improvement in the latest Federal Reserve Bank of Dallas survey as the future production index grew to a score of 42, an above average rating, and one that indicates greater expectations for the manufacturing sector heading into the future.
CORRECTION, SEPT. 2, 12:04 P.M. ET: The story has been updated with context about how Transwestern arrived at the 14% rent increase stat.