Improved market fundamentals and tight vacancies continue to increase the amount of new construction across the U.S. with over 119.5 msf under construction at the end of the first quarter, up 83.0% compared to the same period a year ago. Dallas/Fort Worth, which is leading the nation in new development, is especially notable with 16.5 msf currently under construction. Increased construction is putting upward pressure on industrial land prices and most major markets posted significant increases in land value in the last five years.
CONSTRUCTION REMAINS ROBUST
New development is also particularly strong in Inland Empire, Chicago, Houston, Atlanta, Central New Jersey, PA I-81/ I-78 Distribution Corridor and Indianapolis. Each of these markets has 4.0 msf or more under construction at the end of the first quarter. The amount of new construction will not subside any time soon. In the Inland Empire, 5.2 msf of spec construction was completed in just the past eight weeks and a whopping 4.3 msf of spec construction has broken ground in the second quarter.
LAND VALUES RISE ACROSS THE U.S.
The average price for industrial land in the U.S. rose to $8.53 psf at the end of 2013. Not surprisingly, Greater Los Angeles, an in demand infill market close to the ports of Los Angeles/Long Beach commands the highest land value. Strong absorption and occupancy and a shortage of top-tier industrial space will continue to fuel the rapid increase in spec construction. An additional 63.5 msf of new spec development is scheduled to be completed in the U.S. by year-end.
DEMAND CONTINUES TO OUTPACE SUPPLY
Construction completions totaled 25.6 msf in the first quarter. The Inland Empire led the nation in completed construction with 5.4 msf, followed by Dallas/Fort Worth with 2.9 msf. Speculative construction accounted for 36.1% of new completions. With increased demand, net absorption continued to outpace supply with 46.3 msf of occupancy gains in the first quarter.