Port markets continue to drive industrial rent growth

Rents for U.S. industrial space averaged $6.37 per square foot in October, up 3.9% over the past year as demand remains robust, according to Yardi Matrix.

The annualized gain was up from 3.5% in September, and while year-over-year price increases have cooled somewhat since peaking at more than 5% earlier this year, they have continued to hover between 3.5% and 4%. There has been a broad geographic range of annualized rent growth, with the highest gains in the Sun Belt states and in port markets.

California’s Inland Empire has seen industrial rents rise the most over the past year, with in-place rents for existing leases up 6.6% since November 2020. Nashville, at 6.2%, is next, followed by Los Angeles and New Jersey, both at 5.7%.

New Jersey’s surge in rents has been driven in large part by increased cargo activity at the Port of New York and New Jersey, the nation’s third-busiest port. Per the U.S. Department of Transportation, there were 6.7 million 20-foot equivalent units (TEUs) that moved through the port in the first three quarters of 2021 — up 24% from the same period last year.

Not every port market, however, has seen industrial rents soar over the past year. A pair of port cities, in fact, sit near the bottom of Yardi’s large-city rankings of yearly rent increases. Boston and Houston have seen rents climb by 1.2% and 1.7%, respectively, since November 2020. Other cities with low rent-growth rates during this time include St. Louis (1.7%) and Kansas City, Missouri, where rents have actually dropped by 0.2%.

Meanwhile, the U.S. industrial vacancy rate ticked up slightly in November to 5.9%, a rise of 20 basis points from the previous month. According to Yardi, industrial vacancy rates are lowest in Southern California. This includes the Inland Empire, where the 1% vacancy rate is the lowest in the nation, as well as Los Angeles (2.9%) and Orange County (3.7%).

New Jersey (3.4%) also has few vacancies due to movement through its port, while cross-country freight transit has helped bring down the vacancy rates in logistics hubs such as Columbus, Ohio (1.9%) and Indianapolis (4.2%).


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