Top 10 Cities for Industrial Real Estate Sales Growth

Industrial real estate has been booming with the rise of e-commerce. After all, products bought online have to come from a warehouse somewhere.

Vacancies overall have dropped to historic lows, while rents have risen to historic highs. Those conditions can produce strong activity for investors buying and selling industrial properties.

Major markets such as New York, Los Angeles, Chicago and Dallas draw most of the attention, according to CoStar’s U.S. industrial market report. Over the past year, sales volume has grown by 6.3%.

Big mergers and acquisitions over the past year drove sales, notably Canadian company Ivanhoe Cambridge acquiring IDI Logistics last November for $3.5 billion and then forming a 50-50 joint venture with fellow Canadian firm Oxford Properties Group this year. The deal involved 111 existing properties, 35 development projects and land for future development.

This and other billion-dollar deals helped boost sales performance in various cities outside the major industrial markets.

Using CoStar data, here are the top 10 cities for industrial sales volume growth over the past year.

10. Kansas City, Missouri: 59.7%

Industrial real estate sales through the first half of this year were better than any other year in the past decade for the large transportation hub. More than $265 million in real estate switched ownership, according to CoStar’s Kansas City market report.

About half of the sales involve one building, an underground warehouse in Independence, Missouri. The building was part of a 54-property portfolio that private equity firm Blackstone Group bought for $1.2 billion.

9. Honolulu: 62.9%

Many of the sales involved buildings occupied by their owners, according to CoStar’s Honolulu market report. The report noted that the largest institutional investors, such as real estate investment trusts, haven't bought much because Honolulu doesn’t have much new high-end product. Most investors are local or from California. The largest deal over the past year involved Oahu Publications, owner of the Honolulu Star-Advertiser, selling the building housing its printing press for $40 million and leasing it back from the buyer.

8. Portland, Oregon: 63.2%

Sales volume in the first half of the year exceeded the same period last year in what is largely a regional distribution market. Sales were helped along with five properties in the area being part of a multistate portfolio that sold to RReef America Property Trust, a real estate investment trust.

According to the CoStar’s Portland market report, most sales, however, carry price tags under $10 million. But over the past year sales volume has hit $902 million, second most in the top 10.

7. Richmond, Virginia: 68.8%

Facebook putting a data center in the area and Brother International locating a distribution center in the Virginia capital has helped increase interest in industrial real estate in the region. The Richmond Marine Terminal’s growing express barge service also has helped increase industrial demand.

Real estate investment trusts weren’t buying until last year, according to CoStar’s Richmond market report. Last year, REITs accounted for 22% of the sales, most of which are single-tenant buildings with a national recognized tenant. The 1 million-square-foot building fully leased by Amazon in Petersburg, south of Richmond, sold as part of a 20-property portfolio Newton, Massachusetts-based REIT Industrial Logistics Property Trust bought in April.

6. Fort Lauderdale, Florida: 77.7%

CoStar’s Fort Lauderdale market report notes that institutional investors have been among the biggest shoppers for industrial real estate. The Fort Lauderdale-Hollywood International Airport, railroad access and Port Everglades has made the area an attractive logistics location. Over the past year, properties have fetched a total of $1.2 billion, the most among the top 10. Part of that was driven by several buildings in the portfolio Ivanhoe acquired when it bought IDI Logistics.

5. Seattle: 80.8%

As one of the largest ports on the West Coast, the Seattle area has a lot of industrial activity. “Investment activity has been strong over the past several quarters, and much of it can be attributed to large institutional deals,” CoStar’s Seattle market report said. In December, RReef America paid nearly $143 million for two Safeway distribution centers as part of a larger multistate portfolio purchase.

4. Norfolk, Virginia: 83.6%

Sales have been generally sluggish over the past several years in part because of greater competition from the Richmond Marine Terminal. But late last year, the sale of 16 properties to DSC Partners in Washington, D.C., helped boost sales volume over $200 million last year, according to CoStar’s Norfolk market report.

The largest sale over the past year came in May, when D.C.-based Easterly Government Properties, a REIT focused on government-leased properties, paid $79.2 million for a 403,737-square-foot in Suffolk, Virginia. It’s leased to the U.S. Joint Staff Command.

3. Cincinnati, Ohio: 84.1%

Strong rent growth and low vacancy has increased institutional investor interest in the area, according to CoStar’s market report. Over the past year, $864 million in property has traded hands. Logistics centers account for most of the transactions, and that’s not expected to ebb given the area’s central location and continuing growth in e-commerce.

2. New Orleans: 89.1%

The Big Easy is one of the smallest industrial markets in the country, but its port handles steel, forest products, rubber and agricultural products. Much of the sales turnover in properties involves small buildings measuring less than 10,000 square feet.

In 2018, “more than 5% of the metro’s inventory traded hands” for the first time in the decade following the recession, according to CoStar’s New Orleans market report. Planned redevelopment of the former Avondale Shipyard could kick the city’s industrial market into high gear. Its sale to a joint venture last October for $60 million was the largest industrial deal in the past year.

1. Austin, Texas: 115%

Austin tops a lot of lists, generally because of its technology sector. Industrial property doesn’t usually raise eyebrows. But, according to CoStar’s Austin market report, the Texas state capital has averaged more than $200 million in sales volume, which is well above the area’s long-term average.

Most sales are small buildings. CoStar’s report noted that only 20 properties above 200,000 square feet had been sold since the beginning of last year. As with other markets, sales volume was driven in part by national portfolio transactions. In Austin, eight properties were part of Ivanhoe Cambridge’s acquisition of IDI Logistics last November, according to CoStar.