The Top 10 Emerging U.S. Industrial Markets To Watch in 2022
The U.S. industrial market posted record gains in occupancy, rental rates and construction activity to close 2021, and the market’s momentum doesn’t appear to be slowing any time soon.
The surge in e-commerce has convinced institutional investors to keep snapping up land in key industrial corridors, pricing out smaller players. In one established market alone, Dallas, there are 60 million square feet of industrial space in the construction pipeline, said Ward Richmond, a Dallas-based executive vice president at Colliers.
“Even in Dallas, where we don't have any geographic barriers to entry, there are no real land sites left that aren't already under developer control,” Richmond told LoopNet.
Challenges can present new opportunities, however. Colliers has identified 10 emerging U.S. industrial markets to watch this year. Meant to identify yield opportunities for investors and expansion opportunities for occupiers, the Colliers report uses four key metrics as of the end of 2021 to outline these up-and-coming markets:
- Vacancy Rate
- Net Absorption
- Construction Pipeline
- Asking Rental Rates
Based on these criteria, Colliers identified the top 10 emerging U.S. industrial markets to watch in 2022:
- Austin, Texas
- Charleston, South Carolina
- Greenville-Spartanburg, South Carolina
- Las Vegas
- Norfolk, Virginia
- Reno-Sparks, Nevada
- Sacramento, California
- Salt Lake City
- Savannah, Georgia
- Stockton/Central Valley, California
Additional information given to LoopNet shows how much industrial space under construction in each of these areas is speculative development.
Austin, Texas
Rapid population gains and major manufacturing relocations led by Tesla and Samsung, among other companies, have driven historic industrial growth in the Lone Star State’s capital. These trends are now supporting larger bulk distribution facilities in the area, and in particular, the Austin-San Antonio corridor.
“We believe the market has runway to nearly double in size without being overbuilt, and with demand for space as high as it currently is, we project a prolonged period of record development and record absorption,” Chase Clancy, a Colliers vice president, said in the report.
- Vacancy: 3.1%
- Absorption: 6.2 million square feet
- Construction: 2.7 million square feet
- Speculative: 95%
- Triple-Net: $12.70 per square foot
Charleston, South Carolina
Charleston’s Hugh K. Leatherman Terminal was the first new U.S. container terminal to deliver in over a decade when it opened in March 2021. These port enhancements are forecast to increase capacity 51% by 2033, according to the South Carolina Ports Authority.
- Vacancy Rate: 3.7%
- Absorption: 5.7 million square feet
- Construction: 4.8 million square feet
- Speculative: 80%
- Triple-Net: $7.05 per square foot
Greenville-Spartanburg, South Carolina
While Charleston is expanding its coastal port, Greenville-Spartanburg’s inland port in Greer, South Carolina, is emerging as the Palmetto State’s transfer hub to the rest of the country. This market is located squarely in the growing “Charlanta” southern megaregion, with about 100 million consumers within a day’s drive.
“Growing supply chain reconfiguration needs are challenging companies to look outside of congested core markets and [Greenville-Spartanburg] is well-positioned to take advantage of this surge in activity,” said John Montgomery, a Colliers managing director.
- Vacancy Rate: 4.8%
- Absorption: 7.1 million square feet
- Construction: 4.8 million square feet
- Speculative: 90%
- Triple-Net: $3.71 per square foot
Las Vegas
Vegas isn’t just a tourist destination. It’s also ideally situated from a logistics standpoint, with proximity to the ports of southern California and the growing Phoenix metropolitan area. In addition to several nearby interstates and competitive tax structure, southern Nevada has a rapidly growing population.
“With delays in construction due to material supply constraints and incredible tenant demand from local and regional tenants, things will remain tight for Las Vegas in 2022,” said Paul Sweetland, a Colliers senior vice president.
- Vacancy Rate: 2.4%
- Absorption: 11.7 million square feet
- Construction: 6 million square feet
- Speculative: 100%
- Triple-Net: $11.14 per square foot
Norfolk, Virginia
Amazon alone has moved into Norfolk in a big way, with the e-commerce giant now occupying approximately 5 million square feet of industrial space in the market. Norfolk is the sixth-largest container port in the United States, and cargo flow rose 25% last year.
Congestion at the ports of Los Angeles and Long Beach, California has led to many shippers sending more freight to the East Coast. A harbor deepening project at the Port of Virginia is expected to deliver in late 2024.
“New build-to-suit and preleased spec developments totaled nearly 600 acres and more than 8 million square feet to be completed between 2021 and 2023,” said Lang Williams, a senior vice president at Colliers. With available space at just 1.2%, this new supply of warehouse and distribution facilities is sorely needed to keep the port growing.
- Vacancy Rate: 1.2%
- Absorption: 5.3 million square feet
- Construction: 1.8 million square feet
- Speculative: 81%
- Triple-Net: $7.29 per square foot
Reno-Sparks, Nevada
Reno is strategically located in the heart of the American West, with seven different states and 60 million people within one day’s drive. The cross-country Interstate 80 runs through Reno, and the cost of business is low compared to neighboring California. Vacancy rates are at an all-time low among the area’s 100 million square feet of industrial space.
“With a recent boom in population and labor market growth, the Reno/Sparks region is poised for an outstanding future,” said Chris Fairchild, a senior vice president at Colliers.
- Vacancy Rate: 1.1%
- Absorption: 5.7 million square feet
- Construction: 5.8 million square feet
- Speculative: 95%
- Triple-Net: $8.18 per square foot
Sacramento, California
Sacramento’s affordability compared to the Bay Area has resulted in a population boom since the start of the pandemic. This has led to rising industrial activity despite California’s population declining for the first time in 2020. As the Bay Area runs out of land to develop, many occupiers are relocating to or expanding in Sacramento due to its central location and relative affordability.
“New speculative development is regularly 80% to 90% leased by delivery and we foresee elevated demand, rising rents, increasing construction activity, and low vacancy rates continuing through 2022,” said Mark Demetre, an executive vice president at Colliers.
- Vacancy Rate: 4.7%
- Absorption: 6.4 million square feet
- Construction: 3 million square feet
- Speculative: 68%
- Triple-Net: $8.25 per square foot
Salt Lake City
Salt Lake City is located at the confluence of two major interstates: I-80, and Interstate 15, which is a major thoroughfare from Canada to Mexico. The area is also the first rail intersection between all major West Coast seaports, and the Utah Inland Port Authority is currently developing a new major transload facility. Nearly all major cities west of the Mississippi can be reached within 18 hours on the ground, and Utah consistently ranks as one of the best states for business.
“We are both grateful and excited about the growth Utah has experienced and look forward to the future,” said Colliers’ Rusty Bellow.
- Vacancy Rate: 1.7%
- Absorption: 9.5 million square feet
- Construction: 13.2 million square feet
- Speculative: 90%
- Triple-Net: $8.41 per square foot
Savannah, Georgia
The fastest-growing and third-largest port in the United States calls Savannah home. Many shippers have expanded or relocated entirely to Savannah in recent years as pricing in ports such as New York and Los Angeles remain high. The Port of Savannah moved a record volume of cargo in 2021 and that figure should push even higher in the future. Savannah tops the nation in total industrial space under construction as a percentage of total inventory, among markets with more than 75 million square feet of industrial space.
“How quickly the market can absorb the 11.1 million square feet of spec space under construction will determine the next wave of development, but if the Port of Savannah continues to expand at the rate it has, the Savannah industrial market won’t be far behind it,” said David Sink, a principal at Colliers.
- Vacancy Rate: 2.3%
- Absorption: 8.3 million square feet
- Construction: 17 million square feet
- Speculative: 66%
- Triple-Net: $5.10 per square foot
Stockton/Central Valley, California
The Port of Stockton is the largest inland port in California, spanning 4,000 acres and more than 7.5 million square feet of warehouse space. It’s also situated near four major freeways, two transcontinental railroads and the San Joaquin River, which connects to the San Francisco Bay. The entire West Coast can be reached within a day.
“The labor, location and logistics are unmatched in the region,” said Mike Goldstein, an executive managing director at Colliers.
- Vacancy Rate: 6.0%
- Absorption: 6.5 million square feet
- Construction: 5 million square feet
- Speculative: 91%
- Triple-Net: $7.56 per square foot
