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1B SF Of New Industrial Deliveries Not Enough To Satisfy Demand


Industrial tenants want more space and they want it now.

Industrial supply nationwide is through the roof — with nearly 1B SF of new space coming online during the last three years — but it isn't enough, according to Transwestern's Q4 2018 report on the market

Despite the surge in supply, there was positive net absorption in 43 of the 47 markets that Transwestern tracked during 2018. During the fourth quarter, 40 markets enjoyed positive net absorption. 

"E-commerce, last-mile delivery and the need to streamline tenants’ supply chain strategies is incentivizing companies to locate near their consumer base," Transwestern Director of Research (DFW) Ryan Tharp said.

The Dallas-Fort Worth market topped the list nationally in total net absorption for the quarter, at just shy of 5.6M SF. Metro Atlanta, Detroit, Chicago and the Inland Empire all experienced net industrial absorption of more than 4M SF during the quarter.

DFW’s draw for industrial tenants comes from its central location, the rapidly growing population, and the relative cost and availability of land, Tharp said in a statement. 

Atlanta has the internet to thank.

"Atlanta's industrial absorption has been quite strong in recent years, and 2018 saw the area continue to set new records," Transwestern Director of Research (Atlanta) Keith Pierce said. "In recent years, the impact of e-commerce has brought about an explosion of demand in Atlanta, from 1M SF distribution facilities to smaller infill locations, to assist with local delivery. Based on current trends, we see strong demand continuing for the foreseeable future."

E-commerce is also the main driver of Chicago’s strong absorption, Transwestern Director of Research (Chicago-Midwest) Sandy McDonald said.

"All businesses related to that model continue to grow in the Chicago area: logistics, distribution, packaging, food storage and more," McDonald said. "National companies are seeing the increased need to add distribution points for their business in Chicago, which is the most active and connected transportation hub in the country."

Greater Los Angeles has the nation's lowest vacancy rate, at 1.2%, with Orange County, Detroit, Cincinnati, Portland, Oregon, and Long Island all well below the nation average, which is 4.7%.

More than 377M SF of industrial space is under construction nationwide, with DFW and the Inland Empire roughly tying for the most in any market, at about 23.6M SF each, Transwestern reports. Construction is also very robust in Chicago, Atlanta and Houston, all with over 10M SF underway.