Top 5 Emerging Cities for Industrial Space

In this article, you'll learn:

• Top 5 emerging cities offering strong potential for industrial space.
• Why Austin, Charleston, and Memphis are seeing increased industrial demand.
• The factors driving growth in Las Vegas and Raleigh-Durham.
• Key opportunities for tenants in these fast-growing industrial markets.

As the industrial market gets tighter, commercial tenants must pay attention to emerging locations that offer favorable properties, infrastructure, and more favorable business climates.

In recent years, several emerging markets have gained traction in the industrial real estate sector, attracting businesses and investors alike. The consistent, climbing demand for space in these areas points to an unmistakable potential for continued growth.

So whether you’re looking for new industrial space or wanting to keep your finger on the pulse of how the country’s commercial demand evolves, read on. You’ll learn the most prominent emerging markets and why they represent significant opportunities for growth and expansion for commercial tenants.

Want to skip the cities and get straight to finding yourself the perfect warehouse space? Check out the free course below designed for corporate tenants to maximize the value of their tenancy in the search for warehouse space. 

1. Austin, Texas

The industrial market in Austin has historically served as a key destination in the transport of goods and materials. It’s location is well connected to with major distribution centers in nearby Dallas and Houston.

Austin's industrial market is currently experiencing a surge in demand, and a major reason for this is the city's thriving manufacturing sector. Companies such as Tesla and Samsung have recently announced plans to build major manufacturing facilities in the area, leading to an influx of contracts and opportunities for suppliers, third-party logistics providers, and other ancillary manufacturers. As these companies race to capitalize on the potential opportunities presented by these large-scale manufacturing operations, demand for industrial space in Austin is only expected to continue growing.

“Austin remains squarely in the middle of an unprecedented industrial boom, with significant tenant demand supporting extraordinary levels of speculative development..."

Learn about other Top Cities in Texas for Commercial Real Estate.

2. Charleston, South Carolina

The industrial market in Charleston is experiencing an unprecedented demand due to several factors. Firstly, the Port of Charleston can now accommodate larger vessels after the city invested in a new terminal and infrastructure to efficiently move cargo.

Secondly, the State of South Carolina is investing billions of dollars to remove transportation bottlenecks in the interstate system, enabling efficient transportation of goods from the port to their destination. Thirdly, the Southeast has seen an influx of capital investment in the electric vehicle market, with Charleston being home to two automotive manufacturers for Volvo and Mercedes.

Fourthly, the population in the metropolitan area is growing much faster than the U.S. average rate and attracting college-educated young adults. Finally, the region has abundant developable land. With all these factors in play, it's no surprise that the overall industrial vacancy rate fell to a historic low of 1.9% in 2022. Developers are expected to continue targeting Charleston for new construction due to the limited availability of space near its growing seaport. The industrial market in Charleston is poised for continued growth, making it an attractive destination for businesses and investors alike.

3. Las Vegas, Nevada

Las Vegas is becoming a prime location for industrial demand due to its competitive tax structure, favorable business climate, and easy accessibility to interstates and highways.

The city's strategic location as a West Coast distribution hub has attracted companies, resulting in record-setting lease rates and all-time low vacancy rates in the industrial market, despite a slowdown in investment and land sales over the last few months.

With nearly 40 million visitors to the Las Vegas resort corridor, the city has become a crucial destination for the Valley's logistics infrastructure.

Asking rental rates for industrial properties have surged by 24% year-over-year, reaching $14.40 per square foot by the end of 2022. This increase in average base rents may be slowing down the demand for space in the market and further negatively implicate businesses already facing economic headwinds, ranging from interest rate hikes to predictions of a recession in 2023. Nonetheless, the Las Vegas industrial market is expected to continue thriving and play a significant role in the Valley's logistics infrastructure.

4. Memphis, Tennessee

Memphis has been experiencing a surge in industrial demand, thanks to its strategic location and world-class infrastructure. As the home of Memphis International Airport, the busiest cargo airport in North America, Memphis has become a vital hub for transportation and logistics. Moreover, the city's central location in the US makes it an ideal distribution point for companies looking to reach customers across the country.

In the past three years, Memphis has seen a significant increase in industrial development, with 12.5 million square feet of absorption and strong occupancy gains. The market has also attracted top national developers, with 9.6 million square feet of construction underway and another 20 million square feet proposed across four submarkets.

The city's diverse business landscape is another key factor driving demand in Memphis. With more than 27,000 companies operating in the city, including over 400 trucking companies, Memphis has established itself as a critical player in the industrial market. Additionally, the recent establishment of the automotive assembly complex, Ford Blue Oval City in Western Tennessee, has further fueled growth in advanced manufacturing and logistics, positioning Memphis for continued success in the industrial sector.

As a result of these developments, Memphis is expected to have a top-five sales year in 2023, with enough momentum to continue driving growth in the market for years to come.

Learn about other Top Cities in Tennessee for Commercial Real Estate.

5. Raleigh-Durham, North Carolina

The Raleigh-Durham area is experiencing a surge in demand for industrial real estate, with vacancy rates remaining at record-breaking lows.

The region's population and skilled labor continue to expand, attracting a variety of diverse tenants, with no signs of slowing demand for warehouse products. Many industry experts predict that the Triangle region will become the industrial hub for the Southeast in the future.

As people migrate to the Triangle, companies in need of warehouse space follow for distribution and manufacturing. This steady demand has led to many new developments across the region, specifically in submarkets connecting Raleigh-Durham to Greensboro. Despite the influx of new developments, demand remains strong enough to prevent a significant increase in vacancy rates.

Sales volume and price per square foot have also increased for the fifth consecutive year, with brokers pleased with the continued growth in the Raleigh-Durham industrial market. The consistent demand and growth of the Triangle region suggest that the area will continue to experience robust demand for industrial real estate, with plenty of new developments set to deliver in 2023.

Top Markets = Top Opportunities for Tenants

As the demand for industrial real estate continues to rise, commercial tenants should consider emerging markets that offer attractive properties, infrastructure, and business environments. In recent years, several cities have become hotspots for industrial development, attracting businesses and investors alike.

These cities have experienced a surge in demand and show great potential for continued growth.

From Austin, which boasts a thriving manufacturing sector, to Memphis, which benefits from its central location and world-class infrastructure, these emerging markets offer unique advantages for commercial tenants. Charleston, with its expanding seaport and growing population of college-educated young adults, and Las Vegas, with its competitive tax structure and strategic location as a West Coast distribution hub, are also top contenders. Finally, Raleigh-Durham, which is experiencing record-breaking low vacancy rates and growing demand for warehouse products, is expected to become the Southeast's industrial hub in the future.

As commercial tenants seek to expand and grow, they should pay attention to these emerging markets and their potential for growth and success. The industrial real estate sector is constantly evolving, and being aware of these hotspots can help businesses stay ahead of the competition and make informed decisions about leasing and investing. So if you're ready to relocate or sign a new warehouse lease, do yourself a favor and work with a True Tenant Rep™.

With 30+ years of unbiased experience, the True Tenant Reps™ at iOptimize Realty^® can save you time and money while maximizing the value of your tenancy to its fullest extent. Learn the tips and tricks we use to find and optimize the perfect industrial space in the free course below.