Mid-Atlantic Research Reflections 2021 - Industrial & Logistics

Sustained demand for warehouse and distribution space has translated into strong market fundamentals across the U.S. in 2021. The proliferation of e-commerce, hyper-inflated transportation costs, and long-term shifts in consumer shopping habits have highlighted the need for safety stock and additional inventory capacity for many key industries. Major retailers now see warehouses as their most cost-effective addition to strained supply chains.

Following 46 consecutive quarters of positive net absorption, industrial net demand in the Mid-Atlantic has expanded by an impressive 6.9 million sq. ft. year-to-date, while vacancy has fallen to an all-time low of 4.5%. As available space continues to dwindle, rents have grown as much as 15% year-over-year in many submarkets, with Baltimore and its surrounding counties experiencing some of the fastest rent growth nationally.

While a handful of construction projects have experienced delays this year, solid market metrics have incentivized more than 3 million sq. ft. of deliveries in the Mid-Atlantic, with another 6 million sq. ft. under construction (5 million in Baltimore alone). As lumber and steel prices return to pre-pandemic levels, developers will likely continue to capitalize on the surging demand and break ground on additional projects.