Undoubtedly, the COVID-19 pandemic has caused a dramatic shift in demand for industrial space as more and more people rely on e-commerce to obtain the products they need.

As office buildings and shopping malls are still struggling with vacancies due to social distancing regulations, the industrial sector has been on an all-time high. It is expected to remain so in the coming years.

As a result, increases in rent for industrial properties have been a lot larger than foreseen. In fact, according to some industry reports, warehouse users who signed their five-year leases back in 2016 faced 25% higher rents when the time came to renew their contracts. Compared to ten years ago, asking rents are approximately 67% higher today.

This article looks at the top markets in the U.S., where demand for industrial space is soaring. Those looking to invest will be well rewarded as these areas continue to grow.

Inland Empire, California

The Inland Empire has a prime supply chain position with rail and freeway access to major trade gateways such as the twin ports of Los Angeles and Long Beach.

Rent increases from the third quarter of 2020 to the third quarter of 2021 for this area were over 11%, indicating that the region's industrial market is still growing.

Currently, the NNN (triple-net) asking rent is about $10.92 per square foot in the Inland Empire.

Both large institutional investors and small- and mid-sized firms are looking to acquire industrial space here to take advantage of the market's tailwinds.

Philadelphia

With its location in the middle of the I-95 corridor that goes from Washington, D.C. to New York City and its manufacturing roots, this city remains a key logistics hub for distribution centers.

Its rent growth is a little over 12% year-over-year, more than any other area on our list.

The NNN asking rent is about $7.65 per square foot in this area. Options for investing in Philadelphia include new construction that is underway in the metro area and old property that is being acquired, renovated, and leased out to better-paying users.

Sacramento, California

For anyone delivering goods into the Bay Area, Sacramento is the vital link between markets. Ideal for e-commerce distributions, the capital of California is also a great location for companies that seek to gain a foothold in both Northern and Southern California.

The NNN asking rent in Sacramento is $8.88 per square foot, and its rent growth is 8% year-over-year.

However, just as with other areas we mentioned, companies such as Amazon are rapidly occupying the market, so it is important to know exactly when and where to invest.

Other areas

In addition to the ones mentioned, other top markets with high rent growth where industrial users are looking for spaces include:

• Salt Lake City

• Las Vegas

• Phoenix

• Atlanta

• Los Angeles

• San Antonio

Takeaway

Although many industries have suffered due to the COVID-19 pandemic, e-commerce has seen a significant upswing and is expected to continue growing. As such, industrial space will remain in high demand as companies seek to expand their distribution networks and improve supply chains.

Investors looking to acquire properties in top markets where rent increases are expected should consider the Inland Empire, Philadelphia, and Sacramento. Investing in these and similar cities will likely bring above-average returns.

For more information on investment opportunities, please contact us at info@cbicommercial.com.