Industrial Top & Bottom Markets, Q1 2019

Industrial Top & Bottom Markets: Effective Rent Growth

The industrial sector was a bit sluggish in the first quarter of 2019, but a number of metros did show strong growth. The U.S. aggregate YoY effective revenue was 2.5 percent this quarter, the same figure as last quarter. However, the top five metros had growth rates of 5.0 percent or higher. San Antonio was among the bottom five markets last quarter as well, but its aggregate growth of -0.8 percent this quarter is not remarkably negative. San Antonio and Nashville were the only markets in the bottom five to have negative aggregate growth rates.


Effective Revenue Per Square Foot, Percent Change 2018Q1 – 2019Q1

Source: Reis, Real Estate Solutions by Moody’s Analytics

The chart above ranks markets by their year-over-year effective revenue growth, which is calculated as the annual change of effective rent multiplied by the occupancy rate. On the left side of the chart, we have the five markets with the highest effective revenue growth, and on the right side, we have the five markets with the lowest effective revenue growth. The navy blue bars represent the metro-level growth rates, and the gray and teal bars represent the submarkets with the highest and lowest growth rates in the metro, respectively. 


Industrial properties have the widest range of performance by far. The best-performing properties this quarter were in Chicago. In the sample used to create the chart (which excludes the top and bottom 10th  percentiles of properties), there were almost 100 properties that had an effective revenue growth rate of 30 percent or higher in Chicago. About a third of those had YoY growth rates of over 40 percent. At the same time, though, Chicago had some of the worst performing properties on the chart. Roughly 50 properties had growth rates more negative than -10 percent. Even then, the properties with positive performance generally seem to outweigh the negatives.


Analysis by Victor Calanog, PhD CRE®. Calanog is the Chief Economist & Senior Vice President at Reis. He and his team of economists and analysts are responsible for the firm’s market forecasting, valuation, and real estate portfolio analytics services. He holds a PhD in Applied Economics and Management Science, trained by a dissertation committee composed of faculty from the Wharton School of the University of Pennsylvania and Harvard Business School.


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