01_January_24_Industrial Report_1400x598

2023 Industrial Sales Total $52 Billion, Roughly Half of 2022 Volume

Key Takeaways: 

  • National industrial in-place rents averaged $7.70 per square foot in December, up 7.4% year-over-year
  • The national vacancy rate stood at 4.6%, unchanged month-over-month
  • Nearly 463 million square feet of industrial space was under construction nationwide
  • Industrial transactions totaled $52 billion in 2023, trading at an average sale price of $129 per square foot
  • Western markets claimed four of the highest sale prices nationwide, with the Bay Area closing December at an average of $334 per square foot
  • Kansas City posted the lowest vacancy rate in the U.S., with 2.7% of its space available for lease at the end of December
  • Dallas-Fort Worth led the South in development with a 33.6-million-square-foot pipeline and sales with a $3.36 billion deal volume
  • New Jersey logged the largest sales volume in the Northeast, closing $2.73 billion at $218 per square foot

Trends & Industry News: Industrial Outlook Solid Heading Into 2024

After running hot following the pandemic, the industrial real estate sector cooled considerably in 2023. The current year will likely be a year of stabilization and normalization for the sector, our latest U.S. industrial market report reveals.

In 2024, rental rate growth will cool, and vacancy rates will climb, with the impact of record levels of new supply working its way through the market. Coastal port markets continued to see the most significant gains for in-place rents, headlined by those in Southern California. All three markets in the region finished the year with double-digit growth of in-place rents. While rent growth may drop into the single digits for these markets in 2024, we expect them to remain at or near the top of rent growth metrics. In the last few months, activity at the Ports of Los Angeles and Long Beach has rebounded from the decline during the first half of 2023 and now roughly sits at pre-pandemic levels.

The new supply pipeline will continue to slow this year. Deliveries peaked in 2023 following a historic ramp-up in starts that only ended when interest rates began to climb in the latter half of 2022. Despite the deceleration of new development, long-term demand drivers for industrial assets remain positive, industrial property outlooks indicate.

If 2023’s word of the year was “normalization,” we are labeling 2024’s motto as “stabilization.” Stabilizing rent growth and deliveries, with enough positive economic undercurrents to have long-term projections remain optimistic but at a more sustainable level.

Peter Kolaczynski, DirectorCommercialEdge

Reshoring and nearshoring of manufacturing will reshape the industrial sector over the long run, but many of those impacts will not yet be seen in 2024. Construction spending on new manufacturing facilities has nearly tripled in the last two years, according to the Census Bureau. Much of this spending is concentrated in computer chip and electric car manufacturing, sites that will take years to deliver but, once complete, will fuel demand for supplementary firms along supplier and logistic networks. Further bolstering the long-term supply outlook, many of the gains that e-commerce made during the pandemic have become entrenched, permanently altering how goods get from retailers to consumers.

Higher interest rates will continue to diminish transaction activity, with capital more expensive and underwriting tighter than in years past. Investment volume fell by roughly half in 2023, but average sale prices saw a slight increase, growing 4.7% year-over-year. Somewhat of a bid-ask gap has formed in the sector, with strong fundamentals allowing owners to feel comfortable holding properties, whereas buyers may be hesitant to pay historically high prices while debt is expensive. A stabilized cost of capital may help narrow the gap and spur investment activity in 2024, but we do not expect this year to see a large increase in transaction volume, as our industrial property outlook suggests.

Rents and Occupancy: Port Markets Continue to Dominate Rent Growth

National in-place rents for industrial space averaged $7.70 per square foot in December, an increase of 10 cents from November and up 7.4% year-over-year, according to our latest U.S. industrial market report. Meanwhile, the average rate for new leases signed in the last 12 months rose to $10.26 per square foot, $2.56 more than the average for all leases.

Southern California experienced the highest surge in in-place rents throughout 2023. Specifically, the Inland Empire witnessed a notable increase of 14.9%, Los Angeles recorded gains of 12.7%, and Orange County saw a rise of 11.3%.

Average Rent by Metro

Rent growth was slowest in the Midwest, with Detroit (3% growth of in-place rents over the last 12 months), Chicago (3.8%) and Kansas City (3.9%) seeing some of the lowest gains. Demand is solid in these markets, but abundant land on the outskirts of the metro area allows for a quick supply response, limiting the rent increases seen in port markets.

Unsurprisingly, coastal markets also saw the largest spreads between existing rents and leases signed within the last 12 months. The Inland Empire saw a $7.54 per square foot spread between new and existing leases — the largest in the nation. It was followed by Los Angeles ($6.52), the Bay Area ($5.77), Miami ($5.59) and Seattle ($5.01).

The national industrial vacancy rate was 4.6% in December, unchanged from the previous month. The national vacancy rate jumped 70 basis points from the beginning of the year as historic levels of new supply were delivered to the markets while demand for space began to cool.

Supply: New Industrial Projects Continue to Break Ground at a Slower Pace

Nationwide, 462.9 million square feet of industrial space were under construction as of December, representing 2.4% of existing stock, our U.S. industrial market report reveals.

After hitting a high of 742.3 million square feet in December 2022, the industrial new-supply pipeline has shrunk every consecutive month as projects deliver and new projects break ground at a slower rate than in previous years.

National Industrial Supply Pipeline Trend (Million Sq. Ft.)

The deceleration, attributed to normalization of demand, heightened borrowing costs and stricter lending standards for construction loans, is well-timed for a sector that faced the risk of overbuilding. Both 2022 and 2023 witnessed new deliveries surpassing 500 million square feet, marking historically high levels for industrial development.

Transactions: Sale Prices Decline in Second Half of 2023

Nationally, industrial sales totaled $52.1 billion in 2023, with properties trading at an average sale price of $129 per square foot. This figure is currently about half of the volume seen in 2022 and 60% lower than in 2021. Although the 2023 number is not final due to a lag in data collection, it is expected to conclude well below the figures from the previous two years.

The primary factor behind the decline in sales volume is the increase in interest rates, with The Federal Reserve implementing multiple benchmark hikes last year, raising the cost of capital for investors.

2023 Year-to-Date Sales (Millions)

While interest rate hikes significantly impacted total sales volume in the past year, the effect on average sales prices was less pronounced. Despite historic increases in 2021 and 2022, the average sale price of an industrial property slowed more moderately in 2023, avoiding the steep price declines observed in other asset classes.

Nonetheless, it would be misleading to assert that interest rate hikes had no impact on industrial sale prices, as the average price per square foot declined more visibly in the latter half of 2023. In the first half of the year, industrial properties traded at an average of $132 per foot, decreasing to $124 in the second half, our industrial property market report shows.

Western Markets: Los Angeles Records Largest Industrial Sales Volume in 2023

Although interest rate hikes slowed down transactions and put downward pressure on the national average sale price, western industrial markets continued to see prices above the national figure. In fact, the top four sale prices were all logged in the West, with the Bay Area coming in first at $334 per square foot, followed by Los Angeles’ $314 per square foot, Orange County’s $296 per square foot and the Inland Empire’s $248 per square foot.

Los Angeles and the Inland Empire also had the largest sales volumes among the leading U.S. industrial markets, with investors closing $3.96 billion and $3.89 billion in industrial deals, respectively.

West Regional Highlights

Additionally, industrial rent growth in the U.S. continued to be spearheaded by Southern California, with the Inland Empire experiencing a notable surge of 14.9% year-over-year in December. Los Angeles followed closely with a 12.7% increase, and Orange County recorded an 11.3% uptick. Outside Southern California, noteworthy examples include Seattle, where in-place rents rose by 8.6% compared to the previous year, but Phoenix (8%) and Portland (7.8%) also posted substantial gains.

Unsurprisingly, the West also continued to see some of the highest asking rents nationwide. Orange County closed 2023 with an average of $14.99 per square foot, followed by Los Angeles’ $13.90 per square foot, the Bay Area’s $12.89 per square foot and Seattle’s $10.70 per square foot. Conversely, Central Valley stood out as the only region with in-place rents falling below the national average of $7.70 per square foot, settling at an average of $6.10 per square foot.

Spread Between New Leases and In-Place Rents

Lease spreads were the widest in California, with the Inland Empire averaging $7.54 more per square foot than in-place rents. At the same time, Los Angeles saw new leases signed at $20.42 per square foot, $6.52 above in-place rents. The Bay Area also had a lease spread of $5.77 per square foot. Meanwhile, Central Valley recorded a lease spread of $3.62 per square foot, outpacing Orange County’s spread of $3.21 per square foot.

Continuing the trends observed throughout 2023, Phoenix remained the number one industrial market for industrial development in the U.S., with 42.5 million square feet of space under construction as of December, accounting for 11.1% of existing inventory. On the other end of the spectrum stood Orange County, with just 471,675 square feet in the pipeline, equal to 0.2% of its total stock, according to our industrial property market report.

Midwestern Markets: Kansas City Posts Lowest U.S. Industrial Vacancy Rate

Kansas City has emerged as a key market for industrial and logistics operations in the U.S., fueled by its centralized location, enabling access to 90% of the country within a two-day drive. The metro has specifically evolved into a crucial logistics hub for automotive suppliers, distributors and third-party logistics providers (3PLs) thanks to its robust infrastructure, strategic location and several economic incentives, according to CBRE.

Due to its positive fundamentals, Kansas City was the tightest industrial market in the U.S. at the end of December, with only 2.7% of space available for lease. Despite healthy demand, rent growth remained slower in Kansas City compared to port markets, with in-place rents increasing only 3.9% year-over-year to $4.83 per square foot. New leases signed over the past 12 months were slightly higher than in-place rents, averaging $5.06 per square foot.

Midwest Regional Highlights

Columbus was the next-tightest industrial market in the nation, with its vacancy rate at 3% at the end of December. The Ohio logistics hub also recorded the most notable rent growth in the Midwest, with in-place rents increasing 6.5% year-over-year to $4.59 per square foot. The metro also saw a lease spread of $1.26 per square foot, with new leases signed over the past 12 months coming in at $5.85 per square foot.

Overall, all markets in the Midwest recorded asking rents below the national average of $7.70 per square foot. Detroit and the Twin Cities came the closest to the national figure, with in-place rents resting at $6.92 per square foot and $6.73 per square foot, respectively. While Detroit saw its rates increase by just 3% year-over-year in December, the Minneapolis-St. Paul market recorded an uptick of 5.7% over the same period.

Thanks to several incentives for economic growth, Kansas City has also become a hotbed for industrial development, consistently leading the Midwest in construction on a percentage-of-stock basis. As of December, the metro had 10.8 million square feet of space underway, equal to 3.9% of its existing inventory. Considering planned projects as well, the market is set to expand its footprint by 17.7% in the near future, based on our industrial property outlook. How much of that will materialize will depend on how interest rates play out in 2024.

Meanwhile, Chicago recorded the largest sales volume, with industrial investments amounting to $2.26 billion in 2023. The Twin Cities followed with the second-largest transaction volume, closing deals worth $963 million. Columbus secured the third position, with a sales volume totaling $709 million. When it comes to sale prices, Cincinnati stood out as the only Midwestern market, with its average sale price hitting $100 per square foot, still below the national average of $129 per square foot.

Southern Markets: Texas Boasts Highest Concentration of New Construction Starts in 2023

Driven by robust population growth, a dynamic workforce, ample developable land and the positive influence of increased trade with Mexico, Texas has become a leading region for industrial development.

Indeed, in 2023, Texas boasted the highest concentration of new construction starts, with three markets ranking in the top five nationwide. Dallas-Fort Worth took the lead with 28.4 million square feet, while Houston secured the third position with 14.1 million square feet and Austin claimed the fifth spot with 10 million square feet breaking ground in 2023. Together, these three markets contributed to over 17% of all nationwide construction starts last year.

Although Dallas-Fort Worth had the highest number of construction starts, the pace of new supply in the pipeline has notably decelerated. In January 2023, the market had 64.2 million square feet (7.5% of existing stock) of space underway. However, by December, the supply pipeline decreased to 33.6 million square feet, representing 3.6% of the existing stock.

Industrial Space Under Construction & Planned (% of stock)

Consistent with national trends, the Dallas-Fort Worth Metroplex witnessed a rise in vacancy rates, climbing from 3.8% in January 2023 to 4.3% in December of the same year, primarily due to an influx of new supply. Despite the uptick in vacancy rates, the market experienced a 7.1% year-over-year growth in in-place rents, reaching $5.77 per square foot in December. Additionally, tenants in the metroplex obtained new leases at a premium, exceeding in-place rents by $2.30.

However, among leading Southern markets, Nashville and Charlotte posted the lowest vacancy rates in December, coming in at 3.1% and 3.5%, respectively. Meanwhile, rent growth was the most robust in Miami, recording a 9.8%-expansion over year-ago figures. Miami also remained the priciest industrial market in the South, with in-place rents averaging $10.69 per square foot. At the same time, new leases inked over the past 12 months averaged $16.28 per square foot, $5.59 more than in-place rents.

South Regional Highlights

Among Southern markets, Dallas-Fort Worth and Houston had the most robust sales volumes in 2023, closing $3.36 billion and $2.26 billion in sales, respectively. Dallas-Fort Worth and Nashville led the region in terms of pricing, with properties trading at $129 per square foot in both markets, followed by Baltimore’s $128 average per square foot.

Northeastern Markets: New Jersey Logs Largest Sales Volume in the Northeast

New Jersey and Boston remained the most expensive industrial markets in the Northeast, with double-digit asking rents, albeit below the rates logged in California markets. In December, Boston rents stood at $10.40 per square foot, rising 6.9% over year-ago figures. At the same time, New Jersey in-place rents came in at $10.07 per square foot, up 8.2% year-over-year.

Bridgeport also recorded a notable lease rate of $8.92 per square foot, climbing just 5.8% in December 2023, below the national growth rate of 7.4%. Philadelphia’s rate stood at $7.67 per square foot, just below the national average of $7.70 per square foot. Here, rents increased 6.2% year-over-year.

Northeast Regional Highlights

The most considerable lease spreads in the Northeast were recorded in New Jersey ($3.41 more per square foot), followed by Bridgeport ($2.43) and Philadelphia ($2.22). Boston saw the most modest lease spread in the Northeast, with new leases signed over the past 12 months averaging $11.67 per square foot, $1.27 more than in-place rents, our industrial property market report reveals.

Across leading Northeastern markets, New Jersey recorded the largest sales volume in 2023, totaling $2.73 billion. The market also claimed the region’s highest sale price, with properties trading at an average of $218 per square foot. In contrast, Bridgeport had the smallest sales volume at $512 million[TM1] .

Philadelphia led the Northeast in terms of new supply, with some 9.2 million square feet of industrial space underway, representing 2.1% of total stock. In contrast, Boston had the smallest construction pipeline in the region, encompassing roughly 2.1 million square feet of industrial space, accounting for 0.9% of its existing inventory.

Economic Indicators: Producer Prices Continue to Cool

The Producer Price Index (PPI), which measures the prices that producers pay for goods and services, fell 0.1% in the month of December.

The decline in the index was driven by a 0.4% fall in the goods segment, while the services segment remained unchanged. The Core PPI, excluding volatile food and energy prices, also showed no change.

On an annual basis, producer prices saw a 1% increase, with services registering a 1.8% rise and goods experiencing a 0.8% decrease.

Producer Price Index

The Federal Reserve's efforts to combat inflation resulted in multiple interest rate increases last year. While price increases appear to be under control, it remains uncertain whether the Fed can achieve a smooth economic transition or if a contraction is on the horizon. Fortunately, a stabilizing PPI suggests that consumer prices are not likely to surge due to supply-side pressures in the near future, and the prospect of further rate hikes is currently unlikely.

The stabilization of producer prices brings positive news for the industrial sector as well. With prices for producers steadying, occupiers may now consider expansions and new leases that were previously unfeasible when faced with annual price increases of 10%.

Download the complete January 2024 report for a full picture of how U.S. industrial markets evolved in 2023, including insights on industry indicators and economic recovery fundamentals.

You can also see our previous industrial reports.


The monthly CommercialEdge national industrial real estate report considers data recorded throughout the course of 12 months and tracks top U.S. industrial markets with a focus on average rents; vacancies (including subleases but excluding owner-occupied properties); deals closed; pipeline yield; forecasts; and the economic indicators most relevant to the performance of the industrial sector.

CommercialEdge collects listing rate and occupancy data using proprietary methods.

  • Average Rents —Provided by Yardi Market Expert, a cutting-edge service that uses anonymized and aggregated data from other Yardi platforms to provide the most accurate rental and expense information available.
  • Vacancy — The total square feet vacant in a market, including subleases, divided by the total square feet of office space in that market. Owner-occupied buildings are not included in vacancy calculations.

Stage of the supply pipeline:

  • Planned — Buildings that are currently in the process of acquiring zoning approval and permits but have not yet begun construction.
  • Under Construction — Buildings for which construction and excavation has begun.

Sales volume and price-per-square-foot calculations for portfolio transactions or those with unpublished dollar values are estimated using sales comps based on similar sales in the market and submarket, use type, location and asset ratings, sale date and property size.

Year-to-date metrics and data include the time period between January 1 of the current year through the month prior to publishing the report.   

Market boundaries in the CommercialEdge office report coincide with the ones defined by the CommercialEdge Markets Map and may differ from regional boundaries defined by other sources.   

Evelyn is a creative writer covering commercial real estate trends and insights in the U.S. Evelyn was previously a senior associate editor at Multi-Housing News and Commercial Property Executive. She has an academic background in Journalism and Irish Studies. Evelyn has been covering the CRE industry since 2017. Reach her via email.

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