The vacancy rate in 2017’s fourth quarter for industrial space in the United States fell to an all-time low of 5%, down from 5.2% in the previous quarter, according to JLL, a research arm of real estate firm Jones Lang LaSalle. But industrial space is even more precious in top logistics markets like Los Angeles and Salt Lake City, where vacancy rates have fallen below 3%.
The demand raised industrial rents to a national average of $5.50 per square foot, up from $5.40 in the previous quarter. JLL expects the competition for quality space and pressure on rent to continue through this year.
There was a growing demand last year for warehouses in the midsize categories, broken down as 100,000 to 249,000 square feet and 250,000 to 499,000 square feet. JLL attributes the demand growth to the tightening delivery times required by e-commerce. That is spurring companies to find warehouse space closer to consumers in more cities so they can speed last-mile delivery.
For example, leasing demand grew last year about 40% for space in the 100,000- to 249,000-square-foot category and about 30% in the 250,000- to 499,000-square-foot category, JLL reports. By comparison, demand grew less than 10% in three categories covering 500,000 to over 1 million-square-foot properties.
The fourth quarter saw absorption of 80 million square feet of industrial space nationally, led by the Atlanta and Dallas markets. The demand for modern bulk distribution space has sent spec development rising at a record pace with more than 75% of the new development completions in the fourth quarter done on spec.