07_July_23_Industrial Report_1400x598

Industrial Sales Volume Reaches $21.2B at the End of Q2

Key Takeaways: 

  • National industrial in-place rents averaged $7.33 per square foot in June, up 7.4% year-over-year      
  • The national vacancy rate stood at 4.5%, up 20 basis points month-over-month   
  • Nationwide, nearly 607 million square feet of industrial space was under construction   
  • Industrial transactions totaled $21.2 billion through June, at an average sale price of $129 per square foot  
  • Phoenix recorded 9% rent growth year-on-year in June, the highest increase among markets without immediate port access 
  • Columbus remained the tightest industrial market with a vacancy rate of just 1.3%  
  • Charlotte boasted the second-largest pipeline in the South, with 14.9 million square feet of space underway 
  • New Jersey recorded the largest sales volume in the Northeast, totaling $1.11 billion 

While industrial properties continue to be one of the most sought-after asset types, challenges in the economy have slowed down investment in the sector. Through the first half of 2023, industrial sales totaled $21.2 billion across the U.S., significantly below the $55 billion recorded during the same period in 2022, according to our latest U.S. industrial market report.  

But higher interest rates and normalized demand also slowed industrial construction, with 147.1 million square feet breaking ground in the first half of the year, a 53% decrease compared to the same timeframe last year.  

Nonetheless, industrial fundamentals remained strong, with significant rent growth, especially in port markets, where tenants continued to pay hefty premiums for new leases. For instance, in Los Angeles, new leases signed in the past 12 months averaged $19.92 per square foot, $7.20 more than in-place rents. At the same time, New Jersey recorded a lease premium of $4.48 per square foot. The wide lease spreads might indicate steady future growth despite economic uncertainties.  

“Normalization” is our industrial word for the second half of the year.

Peter Kolaczynski, CommercialEdge Senior Manager

Rents and Occupancy: Ports Remain Largest Driver of Rent Gains 

National in-place rents for industrial space averaged $7.33 per square foot in June, an increase of four cents from May and up 7.4% year-over-year. 

Southern California continues to see the largest rent gains in the nation, with in-place rents jumping an astounding 17.4% in Inland Empire over the last 12 months, 13.2% in Los Angeles and 10% in Orange County. East Coast ports are seeing healthy gains as well, with Boston in-place rents growing 10.3%, New Jersey seeing 8.8% growth and Bridgeport 8.5%. Phoenix, which is undergoing a manufacturing boom and receives overflow activity from firms crowded out of Southern California, is the only market not near the water in the top 10 for rent growth.  

Average Rent by Metro 

The national average vacancy rate in June was 4.5%, a 20-basis point increase from the previous month. New construction has been at all-time highs since the pandemic, and properties delivering while demand has normalized led to a slight increase in vacancy rates across the country. However, industrial vacancy rates are still tight by historical standards. 

The average rate for new leases signed in the last 12 months rose to $9.76 per square foot through June, $2.43 more than the average for all leases. 

The markets with the largest spreads between in-place rents and new leases were all in California. New leases cost $8.46 more per foot in the Inland Empire, $7.20 more in Los Angeles, $6.56 more in the Bay Area and $5.81 in Orange County. The Midwest generally had the lowest spreads between new and existing leases, but in Charlotte, new leases were eight cents less than the average for all leases. 

Supply: New Construction Starts Continued to Cool as Demand Normalizes 

Nationally, 606.5 million square feet of industrial space was under construction as of June, representing 3.3% of existing stock. Through the first six months of the year, a total of 202 million square feet of industrial space has been delivered, per our industrial property market report.  

Meanwhile, due to higher borrowing costs and normalized demand, new industrial starts have cooled this year, with 147.1 million square feet beginning construction in the first half of the year. During the same period in 2022, developers broke ground on 313.2 million square feet. 

National Industrial Supply Pipeline Trend  

Charlotte was one of the more active markets for new development, with 14.9 million square feet under construction as of June. Logistics is the main focus of the market, with the majority of projects underway found in logistics parks, whether that be new locations or expansions to existing centers.  

For example, Macy’s has committed to the first building of 85 North Logistics Center, a 1.4 million-square-foot building in China Grove. Some companies, such as Sherwin-Williams, Charlotte Pipe and Foundry and Kroger, are building their own logistics facilities in the market. 

Transactions: Industrial Sales Volume Down 61.5% in 2023 Compared to Last Year 

Nationally, $21.2 billion of industrial transactions have been logged through June, our industrial market report reveals. The first half of 2023 has seen a significant slowdown in sales volume compared to last year, when more than $55 billion in sales were recorded during the same period, the latest U.S. industrial market report reveals.  

Nonetheless, while transaction volume has fallen sharply this year, the average sale price of an industrial property has risen slightly. So far in 2023, industrial properties traded at an average of $129 per square foot, up from $124 per square foot last year. 

2023 Year-to-Date Sales (Millions) 

Despite the deceleration in sales volume across all commercial property types, there is still a significant appetite for high-quality industrial assets. Recently, Prologis paid $3.1 billion to Blackstone for a 14-million-square-foot portfolio across some 70 properties in Southern California, Atlanta, Dallas and Washington, D.C. Based on industrial property outlooks, there is hope that the transaction could help provide valuable sales comps for where the transactions market is at in 2023 and help close some of the bid/ask gap. 

Western Markets: Manufacturing Boom Continues to Fuel Phoenix  

Southern California continued to lead the nation in industrial rent growth. The Inland Empire saw a significant increase of 17.4%, followed by Los Angeles at 13.2% and Orange County at 10% year-over-year in June. Rent growth in the West also remained robust outside Southern California. For instance, Phoenix's in-place rents rose by 9% compared to the previous year, while Seattle and Portland gained 7.8% and 7.7%, respectively. 

Consequently, the West remained the priciest industrial market nationwide. Orange County led with an average of $13.70 per square foot, followed by Los Angeles' $12.72 per square foot and the Bay Area's $12.55 per square foot. In contrast, Central Valley was the only region to record in-place rents below the national figure of $7.33 per square foot, resting at an average of $5.77 per square foot. 

The widest lease spreads were also seen in coastal markets: In the Inland Empire, a new lease cost $8.46 more per square foot, $7.20 more per square foot in Los Angeles, $6.56 more in the Bay Area and $5.81 more in Orange County. This meant that in Los Angeles, new leases signed over the past 12 months averaged a dizzying $19.92 per square foot, $19.51 per square foot in Orange County, $19.11 per square foot in the Bay Area and $17.25 per square foot in the Inland Empire. 

Phoenix is currently experiencing a manufacturing boom and is receiving an influx of activity from companies that have been pushed out of Southern California. Thanks to this surge, the market boasted the largest supply pipeline, with more than 58.8 million square feet of industrial space under construction, equal to 16.6% of existing inventory.  

West Regional Highlights 

Looking at transactions, the West led the nation in the first half of the year, with investors trading a total of $6.52 billion across the region's top markets, the latest U.S. industrial market report shows. The Inland Empire claimed the top spot, with $2.44 billion in industrial transactions, closed at an average price of $259 per square foot.  

The next largest sales volumes were recorded in the Bay Area and Los Angeles, totaling $1.23 billion and $1.20 billion, respectively. The Bay Area and Los Angeles also saw the highest average sale prices in the region, with properties trading at $355 per square foot and $344 per square foot, respectively. 

Midwestern Markets: Columbus Remains Tightest Market with Vacancy Rate at 1.3%  

In contrast with Western markets, investors across leading Midwest industrial hubs traded only $2.08 billion year-to-date through June, the lowest volume recorded among the four regions highlighted in our report. 

Looking at individual markets, Chicago led the Midwest, with investors closing $764 million through the first half of 2023 at an average sale price of $84 per square foot. Cincinnati recorded the next largest sales volume, with industrial deals totaling $349 million closed at an average of $145 per square foot. The Ohio metro was the only Midwestern market to top the national average sale price of $129 per square foot. 

Continuing the trends reported in previous CommercialEdge industrial real estate market reports, Columbus remained the Midwest’s tightest industrial market, with only 1.3% of its space available for lease. Indianapolis recorded the next lowest vacancy rate, coming in at 2.9%. For the first time in several quarters, Columbus also recorded the highest rent growth in the region with a 5.1% year-over-year increase in June, to an average of $4.34 per square foot. Cincinnati followed with in-place rents growing by 4.3%, reaching $4.63 per square foot. 

Midwest Regional Highlights 

Overall, all markets in the Midwest recorded asking rents below the national average of $7.33 per square foot, and year-over-year rent growth also stayed below the 7.4% national average. In terms of asking rents, the Twin Cities and Detroit came closest to the national figure, with in-place rents resting at $6.50 per square foot and $6.66 per square foot, respectively. 

The slower growth in rents and lease spreads in the region can be attributed to the more rapidly expanding industrial stock in recent years. Building new supply is easier in these areas than in port markets, providing tenants with more leverage in rent negotiations than in other coastal markets. 

On a percentage-of-stock basis, Columbus continued to have the largest supply pipeline in the Midwest, with 11.4 million square feet of industrial space under construction, accounting for 3.9% of existing stock. Indianapolis followed with 3.2% of its existing stock underway across 11.3 million square feet. Cleveland stood on the other end of the spectrum, with 2.1 million square feet underway, equal to merely 0.5% of local inventory. 

Southern Markets: Charlotte Pipeline Substantial Despite Sluggish Fundamentals 

Among the top industrial markets in the South, Nashville recorded the lowest vacancy rate at 2.6%, followed by Atlanta’s 2.8%. Most leading markets in the region registered industrial vacancy rates below the national rate of 4.5%, except for Memphis (5%), Tampa (5.6%) and Houston (9.2%).  

At the same time, markets with higher vacancies also saw more modest rent increases. For instance, Houston saw lease rates increase 3.4% year-over-year in June, while Memphis and Tampa rents gained 2.8% and 3.9%, respectively. The lowest rent growth, however, was recorded in Charlotte at 2.7%. Miami led rent gains in the region at 8.1 %, becoming the only Southern market to outpace the national growth rate of 7.4%. Atlanta was up 7.1% and Dallas lease rates appreciated by 6.5%. 

Miami also remained the most expensive market in the South, with in-place rents coming in at $10.26 per square foot, making it the only leading market outside the West to post double-digit asking rents in June. The market also logged the widest lease spread, with new leases signed over the past 12 months coming in at $15.20 per square foot. Conversely, in Charlotte, new leases signed cost eight cents less than in-place rents, resting at $6.43 per square foot. 

South Regional Highlights 

Nonetheless, in terms of development, Charlotte was one of the more active markets in the South. As of June, the metro’s under-construction pipeline was 14.9 million square feet, accounting for 4.9% of existing inventory. Since the beginning of 2022, developers delivered 16 million square feet of industrial space, with most of it being logistics.  

The Dallas - Fort Worth Metroplex, however, continued to have the largest development pipeline in the South. As of June, the metro had 52.7 million square feet of industrial space under construction, making up 5.9% of existing stock.  

Through the first six months of the year, Dallas - Fort Worth and Houston recorded the largest sales volumes, totaling $957 million and $907 million, respectively. However, Atlanta and Tampa led in terms of sales price, with assets trading at an average of $114 per square foot.  

Northeastern Markets: New Jersey Records Largest Sales Volume in the Region  

As port markets continued to log the sharpest rent increases across the leading industrial markets in the U.S., Boston rents have grown 10.3% and the New Jersey market has seen 8.8% growth, resulting in average rates of $9.55 per square foot and $9.52 per square foot.  

Bridgeport, Conn., followed closely with rents increasing by 8.5% to an average of $8.41 per square foot. Meanwhile, Philadelphia was the most affordable market in the Northeast, with in-place rents at $7.29 per square foot, up 6.7% year-over-year in June. 

New Jersey is primed for further rent growth as new lease premiums here reached $4.48 per square foot. Nonetheless, each market in the region recorded higher rates for new leases, with a spread of $3.19 per square foot in Bridgeport, $3.01 per square foot in Boston and $2.13 in Philadelphia. 

Northeast Regional Highlights 

New Jersey also continued to lead the Northeast in sales volume, with $1.11 billion in closed industrial deals year-to-date through June. The market also recorded the region’s highest sale price, with properties trading at an average of $224 per square foot. Philadelphia followed, with $482 million in sales at an average of $111 per square foot.  

Philadelphia also had the largest supply pipeline in the Northeast, with more than 20.2 million square feet of space under construction, accounting for 4.8% of total inventory. At the same time, Bridgeport had the smallest construction pipeline with 1.3 million square feet underway, representing 0.6% of existing stock.

Economic Indicators: Producer Prices Cool 

The June reading of the Producer Price Index (PPI) showed that wholesale prices that producers pay for goods and services increased 0.1% year-over-year, the lowest mark in nearly three years, according to the Bureau of Labor Statistics. 

The final demand for services index increased 2.3% year-over-year, while final demand for goods decreased 4.4% since last June. While the PPI receives much less interest than its consumer counterpart, it is a leading indicator of the CPI. With additional interest rate hikes in the cards during the second half of the year, the PPI indicates that the end of the tightening cycle could be near its end. 

The cooling producer prices is good news for the industrial sector, according to industrial market outlooks. More stable prices should allow occupiers to consider expansions and new leases that may not have been feasible when inflation was running hot. 

Producer Price Index 

Trends & Industry News: Manufacturing Spending Spikes 

Spending on manufacturing construction has exploded over the last year and a half, much of which is for advanced manufacturing facilities.  

The Census Bureau reported that in May, the annualized monthly rate for new manufacturing facilities was $194 billion, a figure that has doubled since the end of 2021. According to CommercialEdge data, more than 90 million square feet across 200-plus manufacturing facilities are currently underway. 

Some of the construction spending has been driven by the passage of major pieces of legislation. The CHIPS and Science Act, Inflation Reduction Act and infrastructure bill all have increased spending on new manufacturing plants through tax credits and other incentives. Yet, the rise in manufacturing construction spending began before any of these bills were enacted.  

Supply chains were stressed during the pandemic, with port bottlenecks and shipping delays leading many manufacturers to reconsider where they produced their goods. Trade tensions with China and the ongoing war in Ukraine added further uncertainty to global trade.  

According to an analysis from the Treasury Department, the majority of manufacturing construction growth has been driven by increases in spending for facilities categorized as computer/electronic. As recently as two years ago, these components were a minor segment of U.S. manufacturing construction but have accounted for roughly half of all spending over the first four months of 2023.  

Much of this is being spent on semiconductor facilities. Taiwan Semiconductor Manufacturing Company is building a $12 billion plant in Phoenix, Samsung is adding a $17 billion chip fab in Austin and Intel is spending $20 billion in Ohio.  

Electric vehicle plants are also leading to large investments, with projects like Hyundai’s $5.5 billion plant in Savannah and Panasonic’s $4 billion EV battery facility in Kansas City. Employment in the manufacturing sector has yet to spike, with the sector adding 170,000 new jobs in the last year, an increase of 1.6%.  

Much of what is currently being developed is advanced manufacturing that will require highly specialized workers. Due to automation, it is unlikely that there will be a spike in employment akin to new construction spending, but we expect that growth in manufacturing employment will outpace the labor market as a whole over the remainder of the decade. We anticipate manufacturers will target markets with deep and talented labor pools. 


Download the complete July 2023 report for a full picture of how U.S. industrial markets fared in the first six months of the year, including insights on industry 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 industrial 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 industrial 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.

Recent Reports

commercialedge industrial market report june

Industrial Valuations Rise Amid Normalizing Demand and Muted Transaction Volume

Industrial valuations are rising despite market shifts, with the U.S. average sale price reaching $142 per square foot as of May.

commercialedge office market report

Sales Activity Remains Slow as Discounted Office Sales Jump to 30% 

As of May this year, there have been 600 office sales, an increasing number of which are being sold at discounts.

May U.S. Industrial Market Report

Industrial Vacancies Normalize as High Inflation and Costs Slow Demand

The U.S. industrial vacancy rate was 5.2% at the end of April, unchanged month-over-month as demand for space has been moderating.