Top Markets for Industrial Real Estate Investment: 2024-2025

The industrial real estate sector continues its upward trajectory, with Q2 2024 seeing a national vacancy rate increase to 6.4%. By November 2024, this rate further rose to 7.5%, signaling market stabilization and creating strategic opportunities in select regions. Market data suggests equilibrium between supply and demand approaching in early 2025.

Economic Indicators

Industrial real estate demand continues to stem from fundamental shifts in manufacturing, e-commerce, and distribution. Reshoring initiatives have brought over 1.3 million manufacturing job announcements between 2010 and 2021, with approximately 860,000 positions filled. E-commerce adoption, a key driver, contributed to a 12% increase in the industrial sector’s performance in 2023 alone.

Average rents have also shown upward trends. Regions such as Southern California report rents averaging $1.45 per square foot, while Midwest areas are narrowing lease spreads due to increased competition. Supply chain resiliency and vacancies remain focal points for market analysts, as businesses prioritize efficiency and flexibility in the post-pandemic landscape.

Future Market Outlook

As the industrial real estate market heads toward equilibrium, trends in automation, energy savings, and onshoring are shaping the future. Speculative developments are increasing, especially in regions emphasizing artificial intelligence-driven logistics and energy-efficient facilities.

Economic uncertainty and tight lending conditions continue to influence speculative developments, particularly in regions with an oversupply of large warehouses. Additionally, nearshoring has gained momentum, with businesses seeking to reduce reliance on distant supply chains by relocating operations closer to the U.S.

Industrial Market Trends

The industrial sector is stabilizing, with demand balanced across various regions and reduced supply compared to 2023. A significant driver of this stabilization is the rise in solar panel installations and investments in power-efficient manufacturing facilities.

Lease renewals have become a priority for many tenants, with national rent growth averaging 3% annually. The reshoring of manufacturing and distribution facilities continues to bolster net absorption in key industrial corridors like the Midwest and Southeast.

Industrial Supply Dynamics

National supply trends are evolving, with data centers playing a significant role in regions like Atlanta. Construction projects in this region account for 15% of the industrial supply pipeline, indicating a growing demand for facilities catering to advanced manufacturing and logistics.

Onshoring and manufacturing projects are also reshaping the supply pipeline, particularly in areas like the Midwest and Southeast, where labor availability and transportation infrastructure support robust growth.

Industrial Transactions

Despite rising interest rates, the industrial sales market remains resilient. Year-to-date transaction volume reached $43.2 billion, with sales comps in the Midwest averaging $58 per square foot. Investor demand continues to focus on industrial assets in secondary markets, where average sale prices often yield higher cap rates than in primary markets.

Regional Market Highlights

Several regions stand out as industrial investment hotspots:

• Dallas-Fort Worth: Reports over 20 million square feet of ongoing projects, solidifying its position as a leader in industrial development.
• Indianapolis: Faces a 10% vacancy spike due to speculative builds, creating opportunities for strategic repositioning of assets.
• Orange County: Maintains its status as a top-performing market, driven by strong rent growth and low vacancies.

Other regions, such as Portland and Seattle, benefit from established transportation networks and sustained population growth, while Central Texas continues to attract investment due to its proximity to major import locations.

Midwest Focus: New Blueprint Partners' Strategic Markets

The Midwest emerges as a particularly compelling region for industrial real estate investment, with New Blueprint Partners demonstrating strategic market selection through targeted, value-driven acquisitions.

Wisconsin: A Manufacturing Powerhouse

Milwaukee and Oshkosh showcase the region's industrial resilience. Take NBP's Oshkosh property at 606 East Murdock Avenue - a 190,378-square-foot manufacturing facility leased to Muza Metal Products. This investment embodies the region's strengths: a fully leased facility with a tenant boasting strong financial performance -), located in an area with over 300 manufacturing businesses.

NBP's Milwaukee investments further illustrate the market's potential. Their 182,000-square-foot manufacturing and office facility at 7100 West Calumet Road represents a prime example of their strategy. The property features a recently renewed lease and significant tenant investment, including a corporate IT and training facility, highlighting the market's appeal for businesses seeking modern, adaptable spaces.

Additional Milwaukee acquisitions, such as the 110,000-square-foot warehouse and 130,000-square-foot manufacturing/office property, demonstrate NBP's ability to identify and capitalize on diverse industrial opportunities within the same metropolitan area.

Pacific Northwest Expansion: Vancouver's Potential

The Vancouver, Washington market represents NBP's strategic geographic diversification. Their 700,000-square-foot mixed-use facility, The VIC, stands out as a significant investment, featuring 10 tenants and positioned within a master-planned community. This property offers unique value-add opportunities, including 180 acres of land and potential for future development of 1,800 apartments, 150,000 square feet of retail, and 750,000 square feet of industrial space.

Strategic Investment Approach

NBP's portfolio reflects a nuanced understanding of industrial real estate trends. Their investments target properties with:

• Long-term leases (5-10 years)
• Strong, financially vetted tenants
• Potential for value-add improvements
• Strategic locations with robust infrastructure

These markets exemplify the broader trends of manufacturing revival, e-commerce expansion, and strategic location advantages reshaping the industrial real estate landscape. By focusing on established industrial corridors with proven tenant bases and expansion potential, NBP demonstrates a sophisticated approach to industrial real estate investment.

Rent and Occupancy Rates

Rent growth trends remain a critical focus, with Southern California leading the charge at $1.45 per square foot. Midwest markets, while more affordable, are seeing narrowing lease spreads as demand grows.

Net absorption across regions highlights the strength of industrial demand, while new leases in high-growth areas contribute to national rent averages remaining above pre-pandemic levels.

Investment Trends and Considerations

Industrial debt originations surged in the first half of 2024, totaling $43.2 billion. Construction costs have stabilized, while vacancy rates, now at 7.5%, remain below historical averages despite increased supply.

Investment success hinges on understanding key fundamentals:

• Transportation infrastructure: Enhances operating efficiency and tenant attraction.
• Labor market stability: Influences tenant retention and property performance.
• Energy efficiency and sustainability: Increasingly critical for tenant decision-making.

For example, a recent 190,378-square-foot facility acquisition in Oshkosh demonstrated strong market fundamentals, with long-term tenant commitments and expansion potential supporting sustained performance.

Looking Forward

While primary markets attract significant capital, select secondary markets offer compelling opportunities based on growth potential and market fundamentals. Success requires partnerships with experienced operators who understand market dynamics and can access off-market opportunities.

For investors seeking exposure to these markets, New Blueprint Partners has demonstrated success through strategic acquisitions across multiple market cycles. Their portfolio performance in Wisconsin and Washington regions highlights the potential in well-selected industrial assets.