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Industrial real estate market had strong 2022 but slowed in 2nd half

JLL report shows list rents soared 19.1% by year-end due to record-low vacancies in key markets

Warehouse asking rents went through the roof in 2022, a report finds. (Photo: Jim Allen/FreightWaves)

The U.S. industrial real estate market had a strong 2022, though fourth-quarter transaction activity fell notably as the market grappled with the impact of higher interest rates that reduced returns on investment, according to an annual year-end report published Thursday by real estate services company JLL Inc.

The sector closed 2022 with 467.2 million square feet of nationwide net absorption, the second highest on record. Net absorption is the amount of occupied square feet subtracted by the amount of square feet vacated.

About 100 million square feet of net absorption took place in the fourth quarter, JLL (NYSE: JLL) said. However, the figure was skewed by the delivery of projects that were pre-leased at the time they were delivered.

Transaction volume in the U.S. came in at $136 billion, JLL said. Transaction velocity slowed markedly in the second half of the year, falling by 35% in the fourth quarter. However, the year as a whole was on par with 2021 activity due to a strong start in 2022. 


Vacancy rates in the fourth quarter rose by 10 basis points to 3.4%, JLL said. However, many markets are holding below 3% vacancy rates. This led to a stunning 19.1% year-on-year increase in list, or “asking,” rents, which closed the year at $8.80 per square foot.

“The steep interest rate increases continued to lead to re-pricing of transactions during the fourth quarter,” the report said, adding that investors continued to grapple with widening debt risk premiums due to uncertainty around the Federal Reserve’s next moves and the broad macroeconomic outlook.

A moderation in inflation risk at the start of 2023 has led to some compression in debt spreads and has brought more investors back into the market, JLL said.

Absorption levels are expected to remain constant through the first half of the year as more pre-leased buildings get delivered, JLL said, noting that the pace is expected to level off by midyear.


The six tightest markets in the country — led by Savannah, Georgia — will have vacancy rates below 2% this year and continue to see robust rental rate growth, the report said.

The sector will be boosted significantly by the surge in demand from electric vehicle and battery plants. “As major manufacturers get projects underway, there will also be a wave of necessary distributors and supplies that follow suit” to absorb warehouse space, JLL said.

Construction timelines will return to a normal nine- to 12-month time frame, though construction starts will dip as developers pause amid macro uncertainty, the report found.

As of the end of the quarter, a record 623.3 million square feet was under construction, JLL said.

Dallas/Fort Worth is expected to lead all markets in net absorption, square feet under construction and the most square foot completions, the report predicted.

Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.