Boom in New Development Increasing Industrial Land Values

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.

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.

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.

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.

5-28-2014 11-22-20 AM

About Cushman & Wakefield/NorthMarq

​Cushman & Wakefield/NorthMarq is a joint venture formed in September 2011 by NorthMarq Real Estate Services and the Minnesota operations of global real estate services firm Cushman & Wakefield. By combining the talent of both organizations at the regional level with the global platform of Cushman & Wakefield, we offer clients the best combination of regional strength and global capabilities. The result: the leading commercial real estate firm by all measures in the Upper Midwest.
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