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National Industrial Report October 2023

National Industrial Report October 2023

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Industrial Deals Slow with Bid-Ask Gap Unchanged

Key Takeaways:

  • National industrial in-place rents averaged $7.51 per square foot in September, up 7.4% year-over-year      
  • The national vacancy rate stood at 4.6%, up 20 basis points month-over-month   
  • Nationwide, nearly 536 million square feet of industrial space was under construction   
  • Industrial transactions totaled $40.3 billion through September, at an average sale price of $135 per square foot  
  • The Inland Empire remained the leader in rent growth, with average rents rising 17.4% year-over-year in September
  • Chicago was the only Midwestern market with a sales volume north of $1 billion
  • Dallas had the largest development pipeline in the nation as of September, with 49.3 million square feet underway
  • New Jersey logged the largest sales volume in the Northeast, closing $1.85 billion at $232 per square foot

The e-commerce boom that began in the early days of the pandemic helped send demand for industrial real estate to never-before-seen heights, but as growth has normalized, a rebalancing has taken shape, our latest U.S. industrial market report reveals.

E-commerce sales volume exploded in 2020, a shock that reshaped retail as we knew it. While growth cooled in subsequent quarters, the gains made during the pandemic are now entrenched.

E-commerce sales volume has increased by 74% since the first quarter of 2021, although almost half of those gains were made in the initial spike in the second quarter of 2021. During the second quarter of this year, there was a total of $277.6 billion in e-commerce sales, according to the Census Bureau, an increase of 2.1% over the first quarter and 7.5% year-over-year.

While on the surface, these numbers look robust, there are caveats. From 2010 (when the Census Bureau began providing the data series) to the first quarter of 2020, e-commerce sales grew at an average rate of 3.6% per quarter. Following the initial COVID-induced spike, that average is just 2.2%. It is also important to note that these numbers are not inflation-adjusted, and increasing prices account for a portion of the growth. Still, e-commerce’s share of core retail sales (excluding motor vehicles, their parts and gasoline) has increased from 14.2% in the first quarter of 2020 to 18.4% in the third quarter.

Naturally, construction is going to slow compared to levels from the COVID explosion, but we see e-commerce as a consistent driver for sustainable and normalized demand through the rest of the decade.

Peter Kolaczynski, CommercialEdge Senior Manager

Even as online sales growth has normalized, it continues to drive significant demand for industrial space because e-commerce operations require much more logistics space than traditional brick-and-mortar. Prologis estimates the additional space necessary for online sales to be three times higher due to “piece picking, product variety, direct-to-consumer shipping and the need to process returns.” While Amazon made waves when it paused on canceled large fulfillment centers last year, traditional big box retailers are still in the process of adding those spaces. Wal-Mart recently opened a 1.5 million automated fulfillment center, the second of four such announced projects that will allow the company to reach 95% of the population with one- or two-day shipping.

For more insights and market-specific data, check out our full report here:



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