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Industrial Report: Manufacturing Surge Drives Industrial Expansion

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With over 100 million square feet delivered since 2022, manufacturing is reshaping industrial real estate despite growing challenges, the latest CommercialEdge data shows. The post Industrial Report: Manufacturing Surge Drives Industrial Expansion appeared first on Commercial Property Executive.

The manufacturing sector continues to expand, with over 100 million square feet delivered since 2022 and another 100 million under construction as of January, according to the latest CommercialEdge industrial report.

Manufacturing investment is driving millions of square feet in new supplier and logistics developments. *Image by SweetBunFactory/iStockphoto.com*

Construction spending for the sector has tripled since 2021, driven by reshoring efforts, national security concerns and government incentives supporting domestic production of EVs, batteries, semiconductors, as well as clean energy technology.

This investment is expected to have a lasting impact on industrial real estate, with the multiplier effect generating millions of square feet in supplier and logistics developments. In the Savannah–Hilton Head market, Hyundai’s $5.9 billion, 17 million-square-foot EV plant has already attracted suppliers like Daechang Seat Co. and Ecoplastic Corp.

However, the sector faces challenges, including land, water and power constraints, labor shortages and potential trade disruptions. Tariffs and trade policy shifts could impact firms that have nearshored operations to Mexico or rely on exports, adding uncertainty to the industry’s long-term outlook.

As of January, the under-construction pipeline included 346.2 million square feet of industrial space nationwide, accounting for 1.7 percent of the total inventory, according to CommercialEdge data. The Southeast has seen a surge in manufacturing development, with nearly 2 million square feet of Charlotte’s pipeline dedicated to this sector—one-third of all space under construction in the market.

Phoenix had the highest share of industrial space under development, with 4.1 percent of its inventory—17.6 million square feet—underway. Other active markets included Memphis, Tenn. (3.9 percent or 11.7 million square feet), Kansas City, Mo. (3.8 percent or 11.2 million square feet), Denver (2.4 percent or 6.8 million square feet), and Dallas-Ft. Worth (2.3 percent or 22.5 million square feet).

Industrial sales in January reached $69.2 billion, with properties trading at an average price of $129 per square foot.

Strong demand keeps industrial rents on the rise

The average national rent for industrial space hit $8.35 per square foot in January, rising five cents from December and up 6.8 percent year-over-year, CommercialEdge data shows. Port-adjacent and Southeastern markets continued to lead in rent growth, with New Jersey posting the highest increase at 10.9 percent over the past year. The Inland Empire and Miami followed at 9.2 percent, while Nashville and Atlanta saw increases of 9.0 and 8.6 percent, respectively.

Despite a rise in new supply pushing up vacancy rates in some markets, strong demand for high-quality, newly built properties has kept in-place rents climbing. The national vacancy rate held steady at 8.0 percent in January, while the gap between market-wide in-place rents and rates for leases signed in the past 12 months stood at $2.22 per square foot.

Read the full CommercialEdge report.

The post Industrial Report: Manufacturing Surge Drives Industrial Expansion appeared first on Commercial Property Executive.