In today's rapidly evolving commercial landscape, identifying the next growth opportunity is paramount. For industrial and logistics real estate investors, traditional first-tier cities are no longer the only viable option. CBRE's latest research report, "Industrial Markets Poised for Growth," reveals an exciting trend: 14 high-potential strategic markets across the United States are attracting attention from investors seeking non-core market opportunities.
Beyond Saturated Markets: The Strategic Shift
For decades, first-tier cities with their superior geographic locations, robust infrastructure, and mature market environments have been the preferred choice for industrial and logistics real estate investment. However, as market competition intensifies, returns in these traditional hubs have gradually declined while land resources become increasingly scarce.
CBRE's report highlights how these strategic markets—far from being obscure locations—possess strong fundamentals and unique advantages that can deliver higher returns and greater growth potential for investors.
Market Dynamics: Demand Outpaces Supply
The research shows that since 2013, cumulative demand in these strategic markets has exceeded supply by 89 million square feet—a significant indicator of robust market demand. This supply-demand imbalance has driven average rental rates up by 25.2%, promising investors stronger returns and appreciating asset values.
Investment Opportunities Across 14 Strategic Markets
CBRE's analysis identifies two distinct categories among these emerging markets:
1. Markets with Vacancy Rates At or Below National Average (4.3%)
- Detroit: The automotive hub is experiencing revitalization, with strong demand evidenced by low vacancy rates and rising rents.
- Las Vegas: Beyond tourism, the city serves as a crucial logistics hub benefiting from e-commerce growth.
- Salt Lake City: The Western transportation nexus shows consistent growth driven by population expansion.
- Milwaukee: This Midwestern industrial center offers stable returns amid manufacturing transformation.
- Reno: Proximity to California makes it an attractive alternative as coastal logistics costs rise.
- St. Louis: The central transportation hub benefits from e-commerce and manufacturing shifts.
- El Paso: Border trade growth fuels demand in this key cross-border logistics center.
These markets demonstrate 6.1% average net rent growth year-over-year in Q2 2023, indicating strong absorption capacity for new supply.
2. Markets with Ample Available Space
- Greenville-Spartanburg: Southeast industrial hub maintains 5.6% rent growth despite new deliveries.
- Dayton: Aerospace and advanced manufacturing drive demand in this Ohio market.
- San Antonio: Population growth sustains industrial demand in this Texas market.
- Savannah: The fast-growing port city shows 14.3% rent growth with 93% pre-leasing.
- California's Central Valley: Emerging logistics center serving agricultural and e-commerce needs.
- Northeast Pennsylvania: E-commerce expansion fuels this Northeast logistics corridor.
- Phoenix: The Southwest metro maintains strong fundamentals despite new supply.
Expert Analysis: Strategic Advantages
Jack Fraker, CBRE's Global Vice Chairman of Industrial & Logistics, notes: "E-commerce growth and economic expansion continue driving industrial real estate demand. Investors seeking higher yields can find opportunities in these emerging hub markets with strong infrastructure, labor availability, and port connectivity."
Matthew Walaszek, CBRE's Associate Director of Industrial & Logistics Research, highlights Savannah's example where Class A properties command 5.75% cap rates versus 5.0% national average for stabilized assets. He notes five markets—Phoenix, Detroit, Central Valley, Las Vegas, and Greenville-Spartanburg—have absorbed 12 million square feet year-to-date against 10.1 million delivered.
Location Advantages and Supply Chain Value
From a supply chain perspective, these markets offer proximity to major ports (Savannah's expanding harbor, Stockton's 126% growth since 2010) and population centers. Phoenix's one-day reach to five Western states exemplifies strategic location benefits.
"These markets combine substantial industrial labor pools with relatively lower costs," CBRE notes. "E-commerce, 3PLs, manufacturing, and food/beverage sectors continue driving demand."
Future Outlook: Evolving Opportunities
Walaszek identifies Portland, Denver, and Charlotte as potential future strategic markets if they demonstrate similar fundamentals—strong demand, rent growth, and competitive pricing to attract investors and tenants.
Investment Considerations
While these markets present compelling opportunities, investors should conduct thorough due diligence regarding local economic conditions, infrastructure, and labor dynamics. Diversification across markets and property types can mitigate risks associated with market volatility, competition, and liquidity.