The manufacturing sector continues to grow at a rapid pace, with over 100 million square feet of industrial space delivered since 2022 and an additional 100 million square feet under construction as of January, according to the latest CommercialEdge industrial report.
Since 2021, construction spending in the sector has tripled, fueled by reshoring initiatives, national security concerns, and government incentives supporting domestic production of electric vehicles (EVs), batteries, semiconductors, and clean energy technology.
This surge in manufacturing investment is expected to leave a lasting impact on industrial real estate, triggering millions of square feet in supplier and logistics developments. In the Savannah–Hilton Head region, Hyundai’s $5.9 billion, 17 million-square-foot EV plant has already attracted key suppliers such as Daechang Seat Co. and Ecoplastic Corp.
Challenges Facing the Sector
Despite its expansion, the sector faces several challenges, including constraints on land, water, and power availability, labor shortages, and potential trade disruptions. Changes in tariffs and trade policies could also affect firms that have nearshored operations to Mexico or rely on exports, adding uncertainty to the industry’s long-term trajectory.
As of January, 346.2 million square feet of industrial space were under construction nationwide, representing 1.7 percent of the total inventory, according to CommercialEdge data. The Southeast has emerged as a hotspot for manufacturing growth, with nearly 2 million square feet of Charlotte’s industrial pipeline dedicated to the sector—accounting for one-third of all construction in the market.
Phoenix led the nation in industrial space development, with 4.1 percent of its inventory—17.6 million square feet—underway. Other active markets included Memphis, Tenn. (3.9 percent or 11.7 million square feet), Kansas City, Mo. (3.8 percent or 11.2 million square feet), Denver (2.4 percent or 6.8 million square feet), and Dallas-Ft. Worth (2.3 percent or 22.5 million square feet).
In January, industrial property sales reached $69.2 billion, with properties trading at an average of $129 per square foot.
Strong Demand Keeps Industrial Rents Rising
Industrial rents continued their upward trend, with the national average reaching $8.35 per square foot in January—an increase of five cents from December and 6.8 percent higher year-over-year, according to CommercialEdge data.
Port-adjacent and Southeastern markets led the charge in rent growth, with New Jersey experiencing the highest increase at 10.9 percent over the past year. The Inland Empire and Miami followed with 9.2 percent growth, while Nashville and Atlanta posted gains of 9.0 and 8.6 percent, respectively.
Although an influx of new supply has pushed up vacancy rates in some markets, demand for high-quality, newly built properties has sustained rent growth. The national vacancy rate remained steady at 8.0 percent in January, while the gap between in-place rents and rates for leases signed in the past 12 months stood at $2.22 per square foot.
Source: CPE