The industrial sector shows no signs of slowing down with absorption surpassing 1 million square feet halfway through the year.
Lack of product remains the biggest challenge for the industrial sector. Since January, the overall vacancy has steadily declined month over month and is currently at a historic low of 1.5 percent. Although the most sought-after spaces continue to be in the 1,000 to 3,000 square foot range, interest in larger industrial space has risen compared to previous years. Many of these larger industrial users are coming from out of state, with 32 percent of deals being new to market over the past year. With this, the need for speculative space will continue to rise.
Over 279,000 square feet of spec construction has been delivered in 2021, accounting for 82 percent of total construction. An additional 1.3 million square feet of industrial construction is projected to deliver by the end of the year, 893,000 square feet being spec. Some notable projects set to deliver include 265,200 square feet at 1906 Smeed Parkway in Caldwell and over 200,000 square feet at 1135 Hickory Avenue in Meridian.
Overall construction is unlikely to pass 2020’s total due to the 2.6 million-square-foot Amazon facility, however, 2021 is on pace to be a record-breaking year for delivered spec construction. Tenants will need to move fast to secure new space considering 89 percent of completed spec space has already been leased.
As more Class A space hits the market, lease rates are expected to rise and hit the mid to high $0.70 per square foot (NNN, monthly) range by the end of the year. User sale prices for industrial buildings are also expected to rise. Compared to last year, median user prices have increased from $144 to $157 per square foot.