28 August, 2019
Strategic industrial markets are offering investors compelling opportunities, as the 10-year U.S. economic expansion has lowered yields and reduced available supply and land sites for new development in primary industrial hubs. Excellent infrastructure, large millennial populations and solid industrial fundamentals have attracted occupiers and investors to these markets, which generally are inland logistics or manufacturing hubs with available labor supply and strong port connectivity.

Since 2013, industrial space demand in these markets has outpaced completions by more than 89 million sq. ft. and rents have increased by 25.2%, according to CBRE Research. Seven of the 14 strategic markets tracked by CBRE (Detroit, Las Vegas, Salt Lake City, Milwaukee, Reno, St. Louis and El Paso) had vacancy rates below or slightly above the national average (4.3%) and aggregate net asking rent growth of 6.1% year-over-year in Q2, making them prime candidates for supply growth.

The remaining seven markets (Greenville-Spartanburg, Dayton, San Antonio, Savannah, Central Valley CA, Northeastern PA and Phoenix) have more available space due to recent new completions, with an average rent increase of 5.6% over the past year.

Overall, these markets have large industrial labor pools at relatively low cost. With industrial demand continuing to increase, current available space and new completions should be fully absorbed. E-commerce, third-party logistics, manufacturing and food & beverage users, which have fueled much of the demand in recent years, remain the most likely candidates to occupy new buildings.

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Savannah

Savannah

Savannah has become a major logistics and distribution hub due to the Port of Savannah’s efficient transport of goods, which has attracted a diverse pool of users. With port expansion as a top priority to handle higher inbound volumes, Savannah’s industrial market is poised for further growth.
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Las Vegas

Las Vegas

Las Vegas is one of the fastest-growing industrial markets in the country due to strong occupier and investor demand. Excellent infrastructure and port proximity, combined with a growing metro population, attracted an influx of e-commerce, third-party logistics (3PLs) and wholesaler/retailer occupiers. Healthy development activity will offer prospective tenants quality industrial options. 
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Central Valley CA

Central Valley CA

The Central Valley is a growing inland industrial market benefiting from a thriving Port of Stockton. Port growth over the years resulted in high levels of demand from e-commerce, manufacturing, food & beverage, third-party logistics (3PLs) and retail users, prompting more development activity. Central Valley is primed for further growth due to a strong industrial labor pool and increased industrial demand.
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Phoenix

Phoenix

Phoenix has emerged as a booming manufacturing and industrial hub due to its access to major national markets. Manufacturing, e-commerce, third-party logistics, food & beverage and pharmaceutical companies flocked to the region for comparatively affordable land, labor and real estate. Strong employment and population growth will support the expansion of the local industrial sector and occupier demand in years ahead.
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Salt Lake City

Salt Lake City

Salt Lake City has emerged as a top distribution hub due to increasing warehouse demand and a growing labor force supporting industrial expansion. Strong demand from e-commerce, third-party logistics (3PLs) and consumer goods users have kept vacancy low, prompting more development activity to keep pace with current and anticipated demand in the coming years.
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Northeastern PA

Northeastern PA

Northeastern PA has emerged as a critical inland logistics hub due to dwindling big-box opportunities in neighboring Lehigh Valley and Central PA. With growing e-commerce and third-party logistics demand, development activity has increased. As e-commerce sales in surrounding areas increase the need for warehouse space, Northeastern PA will be an ideal region for users in years ahead.
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Reno

Reno

Reno has emerged as a key manufacturing and distribution hub due to its proximity to several primary markets in adjacent states and a friendly business climate. With no corporate or inventory taxes, occupiers and developers have flocked to the region. Reno is poised for further industrial growth due to increased demand and land availability.
El Paso

El Paso

El Paso is a longtime industrial hub along the U.S./Mexico border and benefits from trade between the two countries. Limited new supply is causing significant rent growth. Low vacancy rates and relatively inexpensive warehouse labor will continue to make El Paso an attractive market for investment.
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San Antonio

San Antonio

San Antonio, strategically located near the U.S./Mexico border, has emerged as a logistics hub for the Southwest region. A large military presence supports the local economy, in addition to a large and diverse manufacturing industry. San Antonio will continue to benefit from robust population gains, which will drive industrial demand in the region.
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Dayton

Dayton

In the heart of the Midwest, Dayton benefits from its location at the convergence of major North-South and East-West interstates and its proximity to Indianapolis, Cincinnati and Columbus. Dayton’s economy benefits from the Wright-Patterson Airforce Base and related ancillary contractors. Increased defense spending should bode well for the Dayton industrial market.
St. Louis

St. Louis

St. Louis benefits from a superior Central U.S. location along the Mississippi River and at the convergence of four North-South and East-West Interstates. A recent resurgence in manufacturing has been a boon to industrial demand and investor interest. St Louis will continue to benefit from its position as a distribution and manufacturing hub in the middle of the country.
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Detroit

Detroit

Detroit remains a major manufacturing and R&D hub for the U.S auto industry. Fiat Chrysler is investing $2.5 billion in a new assembly plant that will employ 5,000 workers, while Ford is also making a sizable investment in the market. Detroit is well-suited for continued reinvestment as the local industry evolves to green and advanced manufacturing.
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Milwaukee

Milwaukee

This Southeast Wisconsin city benefits from its proximity to the largest industrial market in the U.S.—Chicago. Milwaukee’s industrial vacancy rate is at a cyclical low, while asking rental rates are at their highest level since CBRE began tracking the market. A booming manufacturing industry and excellent market fundamentals make Milwaukee ripe for further industrial investment.
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Greenville/Spartanburg

Greenville/Spartanburg

Greenville/Spartanburg benefits from its Sunbelt location between Atlanta and Charlotte, the center of the emerging Piedmont-Atlantic mega-region. As a prime location for distribution, the region benefits from lower than average labor costs and a low level of unionization, making Greenville/Spartanburg a prime location for manufacturing operations. Population growth and lower business costs will continue to create industrial demand.
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