Phoenix leads nation for widest industrial lease spread

Article originally posted on AZ Big Media on October 29, 2024

California continues to dominate the industrial sector in rental rates, setting high benchmarks for rent levels across the nation. According to the October industrial report, Orange County leads the nation with an average rent of $15.73 per square foot, closely followed by Los Angeles at $14.98 per square foot and the Bay Area at $13.49 per square foot. In addition, the report shows that Phoenix leads the nation for widest industrial lease spread.

Other key takeaways:

  • Phoenix saw the region’s widest lease spread, with new contracts signed at $3.70 per square foot more than average in-place rents.
  • Southern California markets continue to lead U.S. rent growth: the Inland Empire saw a 12.1% year-over-year increase, followed by Los Angeles with a 9.5% surge
  • Orange County’s vacancy rate went upby 60 basis points month-over-month to 5.3%
  • Investor interest in Western markets remains strong, with the Bay Area ranking second nationally in sales volume at $2.8 billion through September

The average rate for new leases signed in the past 12 months was $10.36 per square foot, $2.20 more than the average across all leases regardless of the signing date. Miami saw the highest premium for new leases, as the average lease signed here in the past year cost $5.65 more per square foot than the overall market average. Bridgeport ($4.38 more per square foot) and Boston ($3.70) also saw significant premiums for new signings.

Among markets without port access, Sunbelt markets had the largest lease spreads — Phoenix ($3.70), Charlotte ($3.66), Nashville ($3.62) and Atlanta ($2.96) all had new lease rates significantly higher than the market’s overall average rent.

National highlights:

  • The national average in-place rent for industrial space in September 2024 was $8.16 per square foot, up 7.1% Y-o-Y
  • The average rate for new leases signed in the last 12 months was $10.36 per square foot, $2.20 more than the average for all leases
  • 362.6 million square feet of industrial space is under construction, while 283.1 million square feet was completed so far this year
  • Industrial transactions totaled $43.7 billion through the first three quarters of 2024, with an average sale price of $130 per square foot

Across the U.S., 362.6 million square feet of industrial space was under construction as of September, representing 1.8% of stock, our latest industrial property market report shows. Year-to-date industrial completions have totaled 283.1 million square feet through the end of September. While the total amount of stock delivered this year represents a significant drop from the past two years, it will still surpass any annual total recorded in our database before 2020.

 

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