Southern California’s Inland Empire is one of the fastest growing areas in the U.S., with strong economic growth throughout 2020. For those who are unfamiliar, the area is generally thought to consist of Riverside County and parts of San Bernardino county, the two counties directly west of Los Angeles. Over the last decade, the area has added nearly 350,000 jobs, the highest percentage increase of any area in California. In addition, area-wide shipping spiked significantly in 2020, which should lead to a sustained increase in demand for industrial properties. Unemployment in Inland Empire fell over the first quarter of 2019, and is currently approximately 4.3%, roughly equal to the unemployment rate for the state as a whole.
Since 2014, the Inland Empire area has seen 22 million sq. ft. of positive absorption for industrial real estate. Vacancies are ranging between 2.0 and 2.5% for the western part of the Inland Empire, while they sit at around 6.5% for the eastern part. The eastern part of Inland Empire is especially known for its availability of wide open land, which can be utilized for a variety of industrial purposes. Perhaps due to this, eastern Inland Empire had 1.8 million sq. ft. of construction completed in Q1 2019, while the Inland Empire as a whole had 29.9 million sq. ft. of development underway during that same period. In addition, industrial rental rates are continuing to increase, averaging $0.68/sq. ft./month for triple net leases, more than doubling from 2010.
Atlanta remains one of the fastest-growing commercial real estate markets in the U.S., having gained nearly 60,000 jobs over the last 12 months, almost twice the national average. Atlanta‘s warehousing and transportation industry continue to dominate with employer, with 25% job growth since 2012. The manufacturing and construction industries are also growing quickly, which should lead to a substantial increase in demand for industrial space. More than 18 million square feet of industrial construction was completed in 2018, with nearly 29 million leases signed that year, a nearly 25% jump since 2017. Overall, 21.6 million square feet of commercial real estate was absorbed in 2018. Vacancy rates have been steady, and are currently sitting at 7.7%., while 68.2 million square feet of construction is currently in progress.
Chicago is another one of the hottest markets for industrial real estate in 2021. Over the first quarter of 2019, unemployment dropped nearly 1%, to 4.0%, bringing it close to the national rate of 3.8%. More than 8,000 jobs were added to Chicago’s manufacturing sector from Q1 2018 to Q1 2019, which is likely one of the strongest drivers of the area’s industrial real estate market.
While less square footage was absorbed than during Q1 2018, rental rates increased to $5.48 per square foot, continuing the area’s trend of industrial rent growth. In addition, industrial vacancies dropped by 1.3%, and more than 4.8 million square feet of industrial space was added via construction completions. Nearly 16 million square feet of industrial space remains in the construction pipeline, much of which should be completed in 2019. Despite this, even more projects are expected to break ground over the next 6-12 months, which should help bring supply in line with demand.
Philadelphia added nearly 35,000 jobs in Q1 2019, with unemployment dropping 0.6% over the previous 12 months. 1.3 million sq. ft. of new industrial space was finished in Q1 2019, with an additional 4+ million sq. ft. of additional space expected to be finished in the upcoming three quarters, more than half of which is speculative development. Industrial rents per square foot have increased by more than 10% over the last year, to $5.28/sq. ft., while vacancy has fallen approximately 30% over the last 5 years, to 3.6%. Overall, experts expect demand to increase over the coming years, leading to additional industrial development and a promising investment market.