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Industrial Emerging Markets by Tenant Type

We examine national industrial leasing statistics to pinpoint the top-performing emerging markets across six key tenant categories.


Over the past few years, industrial markets have grown dramatically. From first quarter 2020 to fourth quarter 2022, there was a 9% increase in inventory—over 1.3 billion square feet (bsf)—with 1.4 bsf of net absorption and over 2.4 bsf of leasing activity. Several markets have emerged as growth markets, and they are becoming strategically important for operations, as well as attractive opportunities for industrial investors. For the purposes of this interpretation of leasing data, we examine national industrial leasing statistics from 2020-2022 to see which markets, outside of the seven primary industrial markets, performed the best in our six major tenant types: third party logistics (3PL), construction/building supplier, e-commerce, retailer/wholesaler, food & beverage and manufacturing. We selected a leasing-activity “winner” for each category and one overall top performer.  

3PL – Indianapolis


Outside of three primary markets leading the way (Inland Empire, Atlanta, and Chicago), Indianapolis emerged as a clear leader, ranking fourth for the most 3PL leasing activity over the three-year period. With 17 deals over 500,000 sf, and four deals over 1 msf, Indianapolis has seen more than 33.8 msf of 3PL leasing activity over the past three years. Top tenants included U.S. Postal Service, C.H. Robinson, XPO Logistics, Geodis and FedEx. 

A 3PL provider can scale a company’s space, labor and transportation, depending on what services are required. Manufacturers, suppliers and other producers can more effectively and uniquely grow in new territories with much less hassle. A 3PL is designed to optimize the logistics functions, something a newer retailer may have less expertise in, and clear the path for enhanced business growth. Indianapolis’ central location in the Midwest, easy highway connections and access to three Class l rail lines makes the city an ideal location for 3PL occupiers to put down roots.  

It is unsurprising that Indianapolis has become an attractive option for 3PLs. With more than 53.2 msf of new development and the three-year quarterly asking rent average staying 33% below the national rent average at $4.93 psf, there is plenty of reasonably priced space for 3PL operators to take advantage of.  

In addition to less costly and more abundant space, the warehouse worker labor cost is some of the lowest in the Midwest at $20.83 per hour for the four-position warehouse worker average (selector, material handler, forklift operator, maintenance associate), second only to Kansas City. Indianapolis remains the least expensive market for production workers in the Midwest, meaning machine operators and assembler teams that may want to be close to their distribution facilities will also find cheaper labor. In the coming years, we will continue to see Indianapolis rank high alongside the primary markets for 3PL activity.  

Construction/Building Supplier – Charlotte 

Charlotte posted the second-highest demand totals within this sector among emerging markets with over 2.5 msf of transactions completed over the three-year period of 2020-2022, ranking fifth in the nation for this lease type. Charlotte yielded higher totals than some primary markets, such as the Inland Empire, Chicago, Los Angeles and the PA I-81/I-78 Distribution Corridor. Most deals inked in Charlotte by this occupier group were on the smaller side, mainly under 150,000 sf, and no deals greater than 300,000 sf were transacted by construction/building supply companies.  

These healthy totals were partially attributed to the robust population growth seen in this market and surrounding areas. Population growth will typically lead to an increase in residential construction starts, which helps propel this industry sector. From 2016 through 2022, Charlotte’s population swelled by 7.7%, more than double the U.S. average during that time. The region is expected to record further population growth, which is good news, as the metro will likely require further developments of single-family homes and multifamily projects. This in turn leads to the need for more construction and building supplies going forward. With the growth in population and residential construction in Charlotte, there was also a surge in industrial development and new Class-A buildings to satisfy the vigorous demand and growing consumer base. Over 18 msf of new industrial product was built in Charlotte since the start of 2020, and another 15 msf is under construction right now. As more people moved to Charlotte amid improving economic conditions, there was also the need for more office space; 7 msf of office product was delivered from 2019 through 2022, which benefited industrial occupiers, as the growing population and workforce led to the need for not only more warehouses and distributions centers, but also tools, supplies and materials needed by developers and builders.  

E-Commerce – Kansas City 

Kansas City led the emerging markets in e-commerce leasing activity, with over 6.1 msf of leasing activity from 2020-2022. To be clear, when referencing e-commerce leasing, we mean by tenant type exclusively. For example, Walmart is a retailer, but a warehouse or distribution center might be used as e-commerce space. Wayfair, on the other hand, is classified as a true e-commerce tenant type.   

Kansas City had five new deals over 500,000 sf completed over the 2020-2022 period, and top tenants included Boxycharm, and a fair amount of space going to an undisclosed e-commerce giant that signed seven leases in the Kansas City market over the past three years. 

In terms of leasing, Kansas City is geographically desirable, especially for e-commerce tenants looking to find long-term space. According to 2020 census data, the geographic center of the United States is about two hours northwest of Kansas City’s center, and the mean population center of the United States is about two hours southeast of Kansas City’s center. As we saw digital sales skyrocket during the pandemic, and more consumers preferring to shop online, the need for space to hold those goods has become paramount.  

From 2020 to 2022, Kansas City added 23.6 msf of new space to the market. Like Indianapolis, this market boasts lower-than-average rents compared to most of the country—recording an overall asking rent of $5.53 psf at the end of fourth quarter 2022. This is more than $3 psf lower than the national average from the same time. In addition, Kansas City has the lowest labor costs in the Midwest, at $20.73 per hour for the four-position warehouse worker average.  

Food & Beverage - Columbus

Columbus ranked No. 2 among non-primary markets, with 4.1 msf of deals by food and beverage firms, with deals mostly in the 100,000-500,000-sf range.  That total was on par with Central New Jersey and was more than double that of Los Angeles. Furthermore, outside of Chicago and Indianapolis, Columbus was the most active market for this industry sector in the Midwest. In 2022 alone, over 2 msf of leases were completed, including SK Foods’ 163,000-sf built-to-suit lease of a cold-storage facility in the southeast submarket. Also, in one of the largest deals of the year in Columbus, Post/Treehouse Foods renewed their 717,000-sf lease. 

The Columbus industrial market has benefited from strong demographics and its geographic location. Not only is Columbus a highly desired logistics and industrial hub along I-70, but it also boasts a cargo-focused airport (Rickenbacker Airport), which has seen many industrial developments around this area.  From 2020 through 2022, 34 msf of new industrial product was delivered, providing some much-needed Class-A supply for all occupier types in the region. 

While population growth has been a modest 0.7% annually in recent years, the number of people living in Columbus is anticipated to grow another 3.8% over the next five years. Columbus also has a lower cost of living, and the cost of doing business is below the national average. This has kept the unemployment rate of 2.7% well below the national average, as Columbus has attracted many industrial users to the area, including some food and beverage firms. 

Manufacturing – Phoenix 

Phoenix is the emerging market for manufacturing leasing activity. Over the past three years, the Phoenix industrial market saw nearly 10.7 msf of new leasing activity for manufacturing tenants. This number seems low compared to some of the other categories, but manufacturing leasing is far more uncommon than warehouse/distribution leasing. Most manufacturing is specialized, and tenants will opt to own their space, making the stats more impressive.  

The Phoenix market added more than 56 msf of new industrial space over the past three years, providing plenty of new space for those looking to enter the market. Phoenix is roughly a five-hour drive from the Los Angeles, Inland Empire and San Diego markets, and is much less expensive. Tenants like inexpensive, reliable energy and labor, as well as low worker’s comp costs in a right-to-work state. Due to tightening vacancies across other western markets, Phoenix will continue to attract owner/users that desire to be in the west but can’t compete with some of the California pricing and lack of space. 

In addition to its ideal geographic location and warm weather, the county's population increased by 1.3% from July 2021 to July 2022 alone, with the addition of 56,831 new residents, according to the U.S. Bureau of Labor Statistics. This was the largest gain in residents across of any U.S. county during that time. The growth in population contributed to the local economy by attracting occupiers to the area and providing job opportunities. Phoenix wage rates for production workers is at $18.40 per hour, slightly above the U.S. average but well below the rates of the port-proximate California markets that are pushing $21.00 per hour—making it more affordable for occupiers to staff facilities.   

Retailer/Wholesaler – Memphis 

Retailer/wholesaler demand was a key driver of leasing activity in Memphis from 2020-2022, with 15.8 msf of leases signed, accounting for one-third of the total demand. Retail and wholesale tenants executed more than 9.7 msf of deals in 2021 (fourth in the nation) and another 5 msf in 2022 (eighth in the nation) in Memphis, as major occupiers such as Walmart, Saks Fifth Avenue and Bed Bath & Beyond all leased facilities greater than 1 msf. Nine transactions greater than 500,000 sf were completed in the three-year period, which propelled demand totals.  

While population growth has been modest in recent years, the explosive population surges across many markets in the southeast has helped fuel Memphis’ industrial demand as a whole, including retail/wholesale sectors. Memphis boasts a strong infrastructure and a lower cost of operations compared to many major markets. Approximately 60 million people can be reached in one day’s drive from Memphis, and 73% of the U.S. population can be reached in two days’ drive. This makes it an attractive option for those looking to deliver goods to consumers quickly. Meanwhile, the well-known FedEx hub in Memphis underwent a $1.5 billion modernization and expansion, and UPS invested $216 million into the expansion of the company’s hub. In total, the city has seen more than $2.3 billion in improvements to the local logistics infrastructure in recent years. 

As the local industrial market sustained growth amid strong demand, rent growth swelled by 31% over the last three years, while new developments totaled just under 26 msf since the start of 2021.  

Overall Winner - Houston 

Houston is the market that ranked either first or second place in all categories, excluding primary markets. The Houston market has had nine deals over 1 msf in the past few years and has thrived mostly in e-commerce and retailer/wholesalers’ activity. Houston totaled over 131.3 msf in new leasing activity from 2020-2022. Tenant types were broad-based, with leases signed by some of the largest tenants, including Lowes, Home Depot, Target, Wayfair and Tesla. 

Houston has seen over 53 msf of new deliveries, along with strong demand, which brought vacancy down from the five-year historical average of 6.9% to around 6%. This is still higher than the national average of 3.6%, which means Houston is not as tight of a market as most others in the nation which has likely contributed to the strong activity, they are seeing being a more competitive market.  
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