Tight vacancies and high demand are sparking bidding wars for industrial space across the U.S., driving both asking rent and taking rent growth to new highs, according to a new report from CBRE.
Asking rents increased a record 8.3 percent year-over-year in Q4 2020 and 7.1 percent in Q1 2021—well above the five-year annual growth average of 6.8 percent. Asking rents are the listed rates that landlords are offering for space.
Meanwhile, “taking rents” — first-year base rents on industrial leases of 12 months or more—increased 9.7 percent year-over-year for the first five months of 2021. Bulk warehouses accounted for the biggest increases in taking rents. Specifically, leases for warehouses of 500KSF or more surged 13.2 percent, while leases for facilities between 100KSF and 499KSF rose 11.6 percent.
Base rents for Phoenix industrial space climbed 12.1 percent year-over-year, the 11th highest increase in the nation. Demand for industrial product in the area has been strong, as an increasing number of companies are looking to enter or expand in this strategic location.
The trend is playing out across the country, but particularly in coastal markets and high population centers. Northern New Jersey and Inland Empire led the nation with 33.3 percent and 24.1 percent base-rent increases, respectively, through May. Both markets have incredibly low vacancy rates at 2.2 percent and 1.5 percent, respectively. (Source)