It’s been quite a fruitful year so far for industrial real estate in the U.S. According to the National Real Estate Investor, total industrial sales are expected to exceed 2016 levels this year, marking the second-best volume in 10 years. Large portfolio deals are also making a comeback, and both national and foreign investors are betting big on the market, drawn in by record rent growth.
Demand is heavily fueled by the rise of e-commerce, with providers competing for the limited available space. Retail giant Amazon is on the lookout for a new, 8 million-square-foot headquarters to support its growing e-commerce business, pitting major cities against one another. Other players in this sector are likely to follow suit, looking for suitable industrial space for their distribution centers.
The rise of e-commerce and the need for strategically-placed distribution centers to meet growing customer demand are opening the door to a whole new era for industrial development in the U.S. It seemed like the perfect time to look back on how this sector evolved during the past decade, and what the top targets for industrial construction are–perhaps making it easier for Amazon to pick the location of its new headquarters. We used in-depth Yardi Matrix data to compile a list of the top 50 cities for industrial development in the U.S., from 2007 to 2017 (see ‘Methodology’). Check out the results below.
The City of Houston Added the Most Industrial Space in the Past Decade
At the top of the list we find Houston, which added 153 properties totaling over 32.5 million square feet of new industrial space during the past 10 years. The city is a veritable magnet for real estate developers, especially when it comes to office and industrial development. Home to a plethora of oil and gas companies, Space City will always be a good target for investment–one of the largest projects to come online was the 1.6 million-square-foot Dril-Quip World Headquarters, completed in 2011.
Coming in second on our list of top-50 cities is Phoenix, which managed to add 22.3 million square feet of new industrial space since 2007. Phoenix’s industrial market is on a roll, with companies such as UPS leasing space in the area, creating jobs and fueling demand for quality space, according to a recent Colliers report. Notable deliveries include the 1.5 million-square-foot Marshalls Distribution Center, which came online in 2013.
The third most popular city for industrial development during the past decade was Fort Worth, adding 17.5 million square feet of new industrial space to the market. Demand for space is strong across the entire DFW industrial market, according to Transwestern, and various spec projects are currently underway. One of the highlights of the Fort Worth industrial market was the 2013 completion of the 1.1 million-square-foot Alliance Amazon project.
Inland Empire Reigns as Top Market for Industrial Construction
Once we zoom out to market level, Houston drops to the fourth slot, and California’s Inland Empire takes center stage. The market added 307 new projects totaling 131.7 million square feet of industrial space over the past 10 years. Conveniently connected to major ports, freeways and rail lines, the Inland Empire’s location plays a major role in the development of its industrial market. According to a recent Cushman & Wakefield report, the Inland Empire is leading the nation when it comes to industrial leasing volume, posting 21.8 million square feet of activity in the first half of the year. More than 27 million square feet of space were under construction at mid-year, with the area boasting the strongest pipeline in the nation, according to the report. Taking all this into consideration, it’s safe to say the Inland Empire will continue to lead the nation in terms of new industrial development in the near future.
Chicago, benefiting from a strategic location at the epicenter of the Midwest, and a long-standing reputation as one of the country’s primary distribution and manufacturing hubs, was the second most active market for industrial development in the past decade. The market added 322 new projects totaling 109 million square feet of industrial space from 2007 to 2017. Notable projects include the 1.6 million-square-foot development at 2551 Logistics Drive in Joliet, Ill., completed in 2013, and the 898,560-square-foot Pinnacle Business Center in Romeoville, finalized in 2014.
When analyzing industrial construction from a market point of view, Dallas–Fort Worth lands the third spot on our list, bringing in 101 million square feet of new industrial space across 267 projects these past 10 years. The DFW area is, according to Marcus & Millichap, the nation’s second-strongest industrial market, based on net absorption and construction deliveries. Fueled heavily by the rise of e-commerce and increased consumer demand, investment in the industrial sector is booming, with the pace of completions struggling to keep up with demand. Marcus & Millichap suggests that another factor fueling development in the area is the growing presence of out-of-state investors, who are attracted by the market’s proximity to major transportation routes.
Find our top industrial markets and cities on the map below:
The 50 Largest Industrial Projects Delivered in the Last 10 Years
The 50 largest new industrial developments of the past decade are spread somewhat equally among many of the country’s major industrial markets, which are shown on the map above. The obvious exceptions are the Inland Empire, which is present on our list with 14 industrial projects, Chicago, which has 9 projects on the list, and DFW, which occupies 7 spots.
The largest new project to come online during these past 10 years is the 4.1 million-square-foot Goodman Cypress Creek Campus in Waller, Texas. Located within the Houston industrial market, the project was completed this year at 19001 Kermier Road, according to Yardi Matrix data. The West Houston property is owned and managed by Goodman and includes 231,598 square feet of lab space and 5,000 parking spaces.
The second-largest industrial development on our list is the 2.1 million-square-foot property at 301 South Tippecanoe Ave. in San Bernardino, Calif. The Class A Inland Empire warehouse and distribution center was completed in 2008, and is owned by Stater Bros. The six-building property also incorporates 120,615 square feet of office space.
The third-largest project on our top-50 list is the 1.8 million-square-foot asset at 29800 Eucalyptus Ave. in Moreno Valley, Calif. Another Inland Empire development, this Class A project known as the Skechers Factory Outlet was finalized in 2010.
- Data source: Yardi Matrix;
- Markets included: Inland Empire, Chicago, Dallas-Fort Worth, Houston, New Jersey, Phoenix, Atlanta, Charleston, Los Angeles, Philadelphia, Orange County and Long Island;
- Range: 2007-2017;
- We only included new constructions primarily used for industrial purposes;
- Data recorded up until September 2017.