Industrial Rents Readjust Post-Supply Glut, Outdoor Storage Attracts Capital

Key Takeaways:

• Industrial outdoor storage (IOS) proved to be a growing industrial real estate category with several high-profile deals and rent growth of 123% since 2020.
• National in-place rents for industrial space reached $8.66 in August, up $0.03 on the month and 6.1% on the year.
• The national vacancy rate decreased by 30 bps in August to reach 8.7%, albeit still up 200 bps annually.
• Year-to-date industrial sales in California’s Central Valley exceeded $900 million to more than double sales figures compared to the same period last year.
• GM sold its 50% stake in the Ultium Cells battery plant in metro Detroit, propelling the market’s transaction volume to #1 regionally.
• Industrial sales picked up across the South, with markets such as Dallas, Atlanta and Nashville recording significantly more transaction volumes compared to last year.
• Lease spreads remained elevated in the Northeast, with Bridgeport, Boston and Philadelphia recording the highest new lease premiums nationwide. 

Trends & Industry News

Industrial Outdoor Storage Enjoys Investment Boom

Niche industrial real estate types have always had a place in the sector’s big picture, and categories such as cold storage or specialized manufacturing have their own ebb and flow cycles. However, in recent years, one niche industrial subtype that has seen remarkable growth is that of industrial outdoor storage (IOS) our U.S. industrial market report shows. 

As the industrial sector faced dynamic situations due to supply chain issues and trade policy, the flexibility and low cost of outdoors storage has made it increasingly attractive for efficiency-minded occupiers. IOS facilities can be used in a variety of ways, from overflow storage and vehicle parking to infill locations and bulk material yards, making them desirable for tenants and investors.  

That said, supply is limited due to zoning constraints and because well-positioned IOS properties are usually repurposed into higher-value industrial types. As such, rents have been surging due to this supply-demand imbalance with Newmark reporting gains of 123% since 2020. The markets with the strongest outdoor storage rent growth include inland hubs, like Memphis, Atlanta and Phoenix. 

“IOS offers a reasonable point of entry for many investors. This as well as the continued necessity of the sub-category has drawn the attention of institutional players.” 

Peter Kolaczynski, Director, Yardi Research

Notably, most IOS properties are privately held with non-standardized pricing. However, institutional capital is beginning to penetrate the market thanks to attractive returns and low overheads. In fact, an investment survey by PwC conducted last year estimated the IOS market to be worth around $200 billion, including $1.7 billion raised in 2023.  

Since then, investment activity has ramped up, with several high-profile deals so far in 2025. Peakstone Realty Trust entered the sector with the purchase of a 51-asset portfolio valued at $490 million, while a joint venture between Barings and Brennan Investment Group plans to invest $150 million in the sector. Realterm also recently purchased a 13-property IOS portfolio for $277 million. 

Accordingly, our industrial real estate outlook anticipates that the sector will continue transitioning into a more institutionalized asset class with standardized pricing and more increased lender confidence. Even so, pushback from local administrators, as well as residents, will likely contribute to the supply issues that currently plague IOS, even as storage of emerging technologies like aerial delivery drones and autonomous trucks may provide a further boon to demand. 

Rents & Occupancy

Rent Growth in Southern California Readjusts as Supply Boom Settles

In-place rents for industrial space nationwide stood at $8.66 in August — three cents higher than the previous month and up 6.1% annually. 

After double-digit peaks in 2022-2023, industrial rent growth among Southern California markets is cooling. In-place rents in Orange County have increased by 8.3% year-over-year (Y-o-Y), while that figure stands at 8.1% in the Inland Empire. At the same time, Los Angeles recorded weaker growth at 4.2%. Rents have been seeing downward pressure due to increasing vacancies, which rose from all-time lows of around 2% in all three markets to 7.7% in the Inland Empire, 8.2% in Orange County and 8.6% in LA as of August. 

New lease spreads demonstrate the region’s slowdown even more clearly: At the start of 2023, a new lease for Los Angeles industrial space cost $7.26 more per square foot, on average, compared to in-place leases. Now, rates for leases signed in the last 12 months are at the same level as in-place ones. In the Inland Empire, the spread has dropped from $6.06 in January 2023 to $2.12 now, while the figure in Orange Country fell from $5.43 to $2.15. 

In fact, new lease premiums have been dropping across most markets nationwide. A lease signed in the last 12 months cost $1.43 more per square foot compared to the national average for in-place leases, which were down considerably from the $2.45-per-square-foot lease spread recorded in August 2024.

The national industrial vacancy rate in August stood at 8.7%, which was a decrease of 30 basis points (bps) from July, but an increase of 200 bps annually. 

Supply

Manufacturing Development Decreases From 2024 Peak 

There is currently 338.3 million square feet of industrial space being built nationally, representing a projected inventory increase of 1.6%. According to our industrial real estate market report, 205.4 million square feet has already been delivered year-to-date up through the end of August. 

 

Manufacturing space currently accounts for 28% of the industrial pipeline, despite only taking up 14% of new construction starts since the beginning of 2023. This can be attributed to the more prolonged development process of manufacturing facilities, which then keeps them in the pipeline for longer compared to logistics facilities started at the same time. 

After a peak of construction in 2024, development of manufacturing facilities in the U.S. is in decline. Approximately 200 million square feet of manufacturing space started construction between 2021 and 2024, but new starts so far this year add up to less than 20 million square feet of space — a pronounced drop even as the overall industrial pipeline is shrinking.  

U.S. Census Bureau data also shows declining investment in manufacturing development as annualized spending in July 2025 stands at $223.1 billion, which is down 7% from the all-time high recorded in August 2024. Yet, it’s worth noting that manufacturing construction spending is still more than three times higher compared to its 2020 level. 

Transactions

GM Sells Stake in Detroit EV Battery Plant

Industrial sales totaled $43.2 billion year-to-date at the end of August, trading at an average of $137 per square foot, our industrial markets report shows.

 

Among recent major sales, LG dished out $2 billion to buy out the stake of its joint venture partner GM in the 2.8-million-square-foot battery plant being built in Lansing, Mich. The Ultium Cells Plant will soon begin production of electric vehicle batteries, but GM has scaled back its production of EVs due to faltering demand in recent years. Notably, the company settled on selling its stake in the plant before electric vehicle production tax credits were eliminated.  

However, the EV industry still maintains significant momentum, as evidenced by several high-profile transactions such as a $1.5-billion order for batteries from Toyota, as well as the fact that GM maintained its investment in ventures for plants in Ohio and Tennessee. 

Western Markets

Central Valley Industrial Market Sales Double Y-o-Y

Rental rates held steady across the West with most markets experiencing only marginal gains or losses in August. The largest annualized rent growth emerged in the Inland Empire and Phoenix at 9% each, which was only slightly above the national average gain of 7%. Likewise, Denver and the Central Valley recorded moderate rent growth at 6%, while the Bay Area and Los Angeles posted some of the lowest rent appreciation figures not just regionally but also nationwide at 4% and 3%, respectively. New lease premiums in the region ranged between flat rates in LA and $2.23 per square foot in the Central Valley — the seventh-largest premium nationwide — suggesting that tenants may begin receiving respite after the protracted rent rate growth of 2022-2024. 

California’s Central Valley is cementing its role as an important part of the state’s logistics ecosystem, as evidenced by its robust sales performance. Year-to-date industrial transactions in the market as of August total $914 million, more than doubling the $424 million logged through August 2024. Similarly, industrial transaction activity remained strong across the entire region with Phoenix logging $1.8 billion in sales so far this year, followed by LA with $1.7 billion and Seattle’s $1 billion. Average sale prices per square foot slipped by 8% in both Orange County and Los Angeles, but these neighboring markets remain the West’s priciest by substantial margins at $294 and $283 per square foot, respectively. 

 

Pipelines across the region continued to dry up as investors await vacancy rate stabilization and assess market conditions for future industrial development. Seattle distinguished itself as the only Western market with expanded pipeline activity compared to 12 months earlier with industrial construction here now totaling 3.1 million square feet. Otherwise, industrial stock under construction in Denver and Orange County remained relatively stable compared to year-ago levels. All remaining markets experienced annual pipeline reductions ranging from 5% in Los Angeles to 56% in Phoenix. 

Phoenix currently claims the region’s lowest industrial vacancy rate at 7.4%, although this represents an increase of 180 bps compared to last year. In a similar vein, the Inland Empire holds a comparable vacancy rate of 7.7%, ticking up 80 bps Y-o-Y. Several other Western markets also posted vacancies resting below the national benchmark, including the Bay Area (8.2%, up 90 bps), Orange County (8.2%, up 350 bps), Seattle (8.6%, up 170 bps) and Los Angeles (8.6%, down 90 bps in a rare regional bright spot). 

Midwestern Markets

Vacancies in Columbus Peak Amid Stagnating Rent Rates

In August, LG finalized the acquisition of GM’s 50% stake in its Detroit, Mich., battery plant for approximately $2.1 billion to catapult the market’s year-to-date sales volume to $2.5 billion — the second-highest nationally. This landmark transaction also served as the primary driver of the market’s elevated average sale price of $369 per square foot. Conversely, all remaining markets in the region recorded average sale prices below the national average of $137 per square foot, ranging from Minneapolis-St. Paul’s $105 per square foot to Cleveland’s $51. 

Kansas City, Mo., retained its status as the tightest market in our U.S. industial market report with a vacancy rate of 4.5%, close to the 4.8% figure recorded 12 months prior. Vacancy rates in St. Louis and the Twin Cities were also situated below the national average. At the opposite end of the spectrum, the Columbus, Ohio, market continues to grapple with low occupancy as vacancy rates here reached 13.5% in August — the highest among all markets in our study — although that represents a slight decrease from last month’s 13.7% peak. 

 

In August, the Twin Cities market maintained its regional leadership for in-place industrial rents at $7.43 per square foot, finishing flat month-over-month and climbing 5% annually. The Midwest overall remained defined by comparatively low lease rates: Of the eight most budget-friendly markets in our study, seven hail from the Midwest. The situation is similar in terms of lease spreads, as Indianapolis joined Cincinnati, Kansas City and Columbus to become the fourth market in the region with negative new lease premiums, indicating that leases signed in the last 12 months were cheaper, on average, compared to existing leases. 

Development of industrial space in Indianapolis continues its upward trajectory with current projects encompassing 5.6 million square feet of additional space — substantially higher than the 2.3 million square feet under construction at the same point last year. Minneapolis-St. Paul is also experiencing a considerable industrial expansion after a string of new developments in the last few months brought its pipeline total to 5.9 million square feet. That said, Chicago still leads the region in terms of raw construction volume at 9 million square feet, although that figure declined 12% annually. The region’s remaining entries all saw contracting development activity amid the ongoing industry rebalancing. 

Southern Markets

Industrial Sales Activity Picks Up Across the Board 

Vacancy rates for industrial properties in Houston continued contracting, falling to 6.3% in August — the lowest rate in more than a year and the fourth-tightest rate nationwide. In fact, the market’s vacancy contraction of 140 bps represented the sharpest improvement in our U.S. industrial market report, with only Tampa, Fla., recording a comparable vacancy reduction of 110 bps annually. At the same time, vacancies for industrial space in Atlanta and Nashville, Tenn., both rested at 7.9%, positioning them a full percentage point below the national average. 

The emerging wave of industrial expansion across the Southern United States continued gaining momentum. Among the five markets with the largest industrial pipelines nationwide, four — DFW, Houston, Memphis and Atlanta — are situated in the South. Industrial space currently underway in Houston now totals almost 17 million square feet compared to 6.7 million one year ago. Conversely, Charlotte and Baltimore were the only regional entries which saw pipelines drop year-over-year. 

 

Average sale prices for industrial space in Dallas-Fort Worth averaged $134 per square foot to nearly maintain parity with last year’s $138 per square foot. More significantly, this stable pricing emerged from nearly $4 billion in year-to-date sales within the market, which is 34% higher (or $1 billion more) than year-to-date sales as of August last year, underscoring the substantial investment attention that the Metroplex currently commands. Several other Southern markets are also seeing increased transaction activity compared to the previous year, including Atlanta ($1.4 billion, up 14% Y-o-Y), Charlotte, N.C. ($1.1 billion, up 93%) and Nashville ($834 million, up 62%). 

Regional demand for industrial space also remains strong across rental growth metrics, our industrial real estate outlook shows. Atlanta and Tampa ranked among the only three markets in our study to see double-digit rent growth year-over-year. Elsewhere in the region, average rates climbed between 6% (Baltimore and Charlotte) and 9% (DFW and Nashville). Meanwhile, industrial space in Miami still nets the highest new lease premium regionally, with leases signed in the last 12 months costing $3.54 more per square foot compared to in-place leases. 

Northeastern Markets

Regional Coastal Hubs Command Highest Lease Spreads Nationwide

New construction in the Northeast continued to lag behind national trends, contributing to consistently elevated premiums for new leases. Here, the region’s four major industrial markets combined only have approximately 15 million square feet of space under construction — less than the pipeline of markets such as Phoenix or Houston. In this case, Boston’s pipeline emerges as a bright spot within the region with a slight year-over-year expansion, primarily due to the 1.4-million-square-foot Hudson Logistics Center, which recently started construction. 

 

Markets in the Northeast currently display some of the widest spreads between in-place leases and new leases nationally. For instance, Bridgeport, Conn., still boasts the highest new lease premium in our industrial property market report at $5.81, while those in Boston ($4.49), Philadelphia ($3.62) and New Jersey ($3.42) occupy the second, third and fifth spots in our study, respectively. However, regional rent growth may have already peaked as rates remained flat or declined slightly month-over-month across all markets. Nevertheless, Northeastern markets remain among the priciest nationwide under current conditions. 

Year-to-date sales of industrial space in Philadelphia total $706 million, representing an increase of 145% compared to the same period last year. Year-to-date sales in Boston are also 88% more elevated compared to August 2024, while New Jersey — the regional leader in sales volume at $2 billion — experienced a 45% increase. In this area, shifts in logistics networks, growth within select sectors such as pharmaceuticals, and trade policy changes are making industrial space in the Northeast increasingly attractive — a trend which is evident in both transaction activity as well as rent growth patterns.   

Economic Indicators

Warehouse Employment Remains Flat

According to the Bureau of Labor Statistics, the warehouse and storage sector added only 800 jobs in August. This continues a streak of weak employment in the sector, with August being only the fourth month with positive employment in the last year. As a result, the sector now has 26,800 fewer workers compared to 12 months prior, marking a decrease of 1.4%. Overall, warehouse employment has been on a downward trend from a peak in March 2022, dropping throughout the rest of 2022 and 2023 before rebounding modestly in 2024. 

At the same time, employment does not seem to be declining due to weakness in the sector as logistics companies have faced labor shortages in recent years in a field with estimated turnover rates as high as 40%. A recent survey by Instawork outlined that more than half of warehouse operators said that their greatest challenge was finding reliable, quality labor. Consequently, many firms are turning to automation and robotics to offset labor shortages, leading to lower employment. 

Methodology

The monthly CommercialCafe national industrial real estate report considers data recorded throughout the course of 12 months and tracks top U.S. industrial markets with a focus on average rents; vacancies (including subleases, but excluding owner-occupied properties); deals closed; pipeline yield; forecasts; and the economic indicators most relevant to the performance of the industrial sector. Listing rate and occupancy information was based on Yardi Research data.

• Average Rents: Provided by Yardi Market Expert, a cutting-edge service that uses anonymized and aggregated data from other Yardi platforms to provide the most accurate rental and expense information available.
• Vacancy: The total square feet vacant in a market, including subleases, divided by the total square feet of industrial space in that market. Owner-occupied buildings are not included in vacancy calculations.

Stages of the supply pipeline: 

• Planned: Buildings that are currently in the process of acquiring zoning approval and permits, but have not yet begun construction.
• Under Construction: Buildings for which construction and excavation has begun.

Sales volume and price-per-square-foot calculations for portfolio transactions or those with unpublished dollar values are estimated using sales comps based on similar sales in the market and submarket, use type, location and asset ratings, sale date and property size.

Year-to-date metrics and data include the time period between January 1 of the current year through the month prior to publishing the report.

Market boundaries in the CommercialCafe industrial report coincide with those defined by the CommercialCafe Markets Map and may differ from regional boundaries defined by other sources.

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