Industrial sector holding steady despite Amazon slowdown

Amazon’s rapid industrial expansion appears to have come to an end, and the company’s recently canceled expansion plans and decision to sublet some 10 million square feet of space signal a potential shift in the industrial market. Most of it is located in Southern California, New Jersey, New York and Atlanta, markets that have some of the lowest vacancy rates in the country, the latest business advantage industrial report pointed out.

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However, traditional retailers such as Walmart are joining the e-commerce game amid slowing Amazon expansion, fueling competition and long-term construction activity. More than 656 million square feet of industrial space was under construction in May, representing 3.8% of total inventory. Projects in the planning phase accounted for an additional 4%.

Construction activity was highest in Dallas (58.7 million square feet in progress, 7% of inventory), Phoenix (42.2 million square feet, 14.7% of inventory) and the Inland Empire (35.5 million square feet, 5.9% of inventory).

Southern California continues to rule

National in-place rents averaged $6.53 per square foot in May, up five cents from the previous month and up 470 basis points year-over-year. Average rents and rent growth were highest in coastal markets, primarily in Southern California, with Los Angeles ($10.57 per square foot, 7.2% growth), the Inland Empire ( $6.81, 6.8%), Central Valley ($5.39, 6.1%) and Orange. County ($11.89, 5.8%) is leading the way, according to CommercialEdge’s industry report.

The difference between a lease signed last year and average rents in place has reached $1.17, and CommercialEdge expects the gap to continue to grow in the short term thanks to a combination of factors such as demand continuous space and rising inflation. Contrasts were most evident in port markets, where differences were highest in Los Angeles ($3.96), Inland Empire ($3.80) and Orange County ($3.74) .

National industrial market vacancy was 4.7% in May, down 30 basis points from the previous month. Once again, the Coastal and Southern California markets had the tightest vacancies, led by the Inland Empire (0.6%), Los Angeles (2.1%) and Central Valley (2.7 %). On the other side of the spectrum, vacancy in markets such as Boston, Houston, Twin Cities and Cincinnati topped the 8% rate.

Read all CommercialEdge Industry Report.