Key Takeaways

• Industrial construction dropped 19% nationwide in the first half of the year, from 463 million square feet in January to 376 million at the end of June.
• Phoenix remains the market with the most new industrial space underway, with 39.1 million square feet under construction, down 8% from January.
• Savannah, Ga., is poised for the largest industrial expansion compared to current inventory at 18.8%.
• Markets bucking the nationwide trend with pipelines growing in the first half of 2024 included Kansas City, Mo.; Atlanta; and Columbus, Ohio.
• The largest industrial property slated for completion in the second half of 2024 is Hyundai’s 16-million-square-foot plant near Savannah, Ga.
• The largest completion in the first half of the year was the four-building, 7.5-million-square-foot expansion of the Merrill Commerce Center in Ontario, Calif.

After several years of historic development, 2024 continues to stand out as a year of normalization in industrial real estate. The first half of the year saw more completions than new starts, resulting in a shrinking industrial construction pipeline across most markets. Meanwhile, the role of manufacturing continues to increase within the industry, and the second half of 2024 promises to boost the U.S.’s manufacturing outlook with a wave of large deliveries.

Below, using CommercialEdge data on industrial property completions and assets under construction, we highlighted:

(1) the markets with the largest industrial real estate pipelines as of the end of June 2024

(2) the largest properties scheduled for completion in the second half of the year

(3) the largest properties built so far in 2024

National Pipeline Drops 19% From January to 376M Sq. Ft., Phoenix Still Home to Most Industrial Construction Underway

At the end of the first half of 2024, 375.7 million square feet of industrial space was under construction across the U.S., translating into a 1.9% boost of the current national inventory once completed. Notably, the amount being built nationally is down almost 19% compared to the start of the year when 463 million square feet was under construction, and a 45% drop compared to January 2023. As such, this signals that construction starts for new industrial projects are lower than the square footages now hitting the markets from projects breaking ground during the unprecedented development surge in 2021-2022.

At the same time, continuing efforts by companies to increase their domestic production capabilities, particularly in cutting-edge industries such as semiconductor manufacturing and electric vehicle production. Major developments from companies in these fields boosted by government incentives are propping up industrial development as logistics and distribution development takes a back seat.

Momentum in North American advanced manufacturing continues and is driving additive demand for industrial real estate, presenting investment opportunities — and challenges — as this global shift evolves in real time. The juggernaut trajectory of supply chain repatriation continues. Active major manufacturing announcements made since 2020 now tally 400+ projects totaling $530 billion in investment, 270,000 new jobs and a minimum of 270 million square feet of new manufacturing space, all to come in the next decade.

—Doug Ressler, Senior Analyst and Manager of Business Intelligence at Yardi

Consequently, the trend in industrial construction is clear: With expensive loans and normalizing demand for logistics centers and warehouses, new project starts are falling behind completions, leading to pipeline slowdowns across most major markets. However, rather than a negative, this normalization may bring balance after several years of tight vacancies and rising rents. At the same time, interest in manufacturing is robust — both in the case of build-to-suit properties as well as speculative development.

At the market level, Phoenix retained the title of the industrial market with the most space currently being built. With 39.1 million square feet currently underway, the Valley of the Sun’s industrial pipeline is more than 10 million square feet ahead of second-place Savannah, Ga. The largest projects slated for delivery here include Lucid’s electric vehicle (EV) plant expansion, as well as distribution centers in Buckeye, Ariz., and Goodyear, Ariz. At the same time, it’s worth noting that the total under construction in Phoenix is down 8% compared to the start of the year, though what's currently being built will still bring a considerable expansion of almost 10% to the market’s inventory.

Meanwhile, Savannah, Ga. climbed a spot to boast the second-largest industrial stock under construction nationwide with 26.2 million square feet. Savannah’s pipeline also shrank from the 29.8-million-square-foot pipeline in January 2024, although the drop was smaller than that in Dallas-Fort Worth, granting the Georgia market the runner-up spot. In this case, more than 60% of the Savannah industrial space under construction is still in Hyundai’s EV plant in the western part of the metro, with the Central Port Logistics Center adding another 2.4 million square feet.

At #3, the Dallas-Fort Worth industrial pipeline currently encompasses 15.7 million square feet of space. A series of deliveries in the first half of the year — Buildings 1 through 3 of the DFW Logistics Hub in Irving, Texas, as well as Buildings 1 and 2 at Gateway Crossing Logistics Park in Forney, Texas, to name a few — in conjunction with a scarcity of new industrial construction projects brought the market’s pipeline down more than half from the 33.6 million square feet underway in January. Thus, after several years of record-breaking industrial construction in the Metroplex, the market outlook is stabilizing with vacancies inching up and speculative development spooling down.

Fellow Texas Triangle markets Austin and Houston also witnessed similar slowdowns: Austin is now home to the fourth-largest projected industrial expansion by square footage. It's worth noting that the pipeline dropped from 18.2 million to 13.5 million during the span of half a year, and is now equivalent to 9.7% of the market’s current stock. At the same time, the drop in Houston was more pronounced, down from 12.5 million square feet and the seventh-largest pipeline nationally to just under 7 million square feet, ranked 18^th nationwide.

Other markets with significantly shrinking pipelines included the Inland Empire in California (down from 19.4 million to 4.8 million), Chicago (down from 13.2 million to 10.3 million) and Charlotte (down from 11.5 million to 9.1 million). The significant drop in the Inland Empire — which encompasses parts of Riverside County and San Bernardino County — is due, in part, to the completion of four buildings at the Merrill Commerce Center earlier this year, that transitioned 7.5 million square feet from the market’s pipeline to its inventory. However, high industrial construction costs and interest rates are leaving their mark on the Inland Empire’s industrial development outlook, and the scarcity of new construction starts is evident here, as well as in the other markets witnessing slowdowns.

Conversely, several markets bucked the trend by recording growth in their respective industrial pipelines from the start of the year. Namely, as a key Midwestern logistical hub, Kansas City, Mo., had 13.2 million square feet of industrial space under construction at the end of June — up from the 10.8 million square feet in January. In similar fashion, Atlanta’s pipeline was up 66.7% compared to the start of 2024 to reach 10.9 million square feet, while Columbus, Ohio's industrial real estate under construction jumped a sizable 81.4% to 9.9 million square feet. As demand and absorption in major markets continues to normalize, investors may be looking toward inland logistical hubs left out of focus by the previous construction boom.

Hyundai EV Plant Retains Title of Largest Projected 2024 Industrial Construction Project

Advanced manufacturing plants and Amazon fulfilment centers dominated the list of largest industrial developments under construction that are slated for delivery in the second half of the year. In all, four of the 10 largest developments to be completed between July 1 and December 31 are EV plants, being joined by a semiconductor fabrication plant belonging to Samsung. As reshoring efforts continue being boosted by government funds allocated to semiconductors and cleantech, it's likely that the role of manufacturing within the larger industrial sector will only grow.

The remaining properties among the 10 largest opening their doors in the first half of the year include two Amazon warehouses, a data center and three expansions of multi-tenant industrial parks.

At #1, Hyundai’s first U.S.-based electric vehicle plant dwarfs all other industrial properties currently under construction with a reevaluated estimated size of 16 million square feet. In addition to driving much of the industrial development in the Savannah market, the plant will provide the metro with thousands of jobs once it gears up for its planned Q4 opening. What's more, a Hyundai supplier recently announced the construction of a $76-million plant in the market in support of the car-maker’s main facility, highlighting how the multiplier effect can boost local and regional economies benefiting from the manufacturing surge.

The "multiplier effect" describes the local economic impact that occurs when a new manufacturing facility is launched. In industrial real estate , the effect manifests as increased demand for logistics and manufacturing space needed to support a new facility’s operations within its regional, national, or even global supply chain. Many markets with major manufacturing facilities coming online or under construction are witnessing increased industrial activity from support companies and suppliers. This is particularly true for the high-tech, digitalization and automotive/transportation sectors, which have driven the most recent manufacturing investment.

Legacy giants and upstart car companies alike are investing billions into new EV manufacturing facilities across an emerging superregional ecosystem dubbed the 'Battery Belt', which extends from the Midwest to the Southeast. Automakers like Hyundai, Rivian, VinFast, Ford, Toyota, BMW, VW, Volvo and Kia have invested $44 billion in new EV factories or expansions to existing factories, totaling more than 60 million square feet of new production space, all announced since 2020.

—Doug Ressler, Senior Analyst and Manager of Business Intelligence at Yardi

Hyundai isn’t the only auto company behind some of the largest industrial projects scheduled to open in Q3 and Q4. For instance, EV manufacturer Lucid’s factory in Casa Grande, Ariz., in metro Phoenix is quadrupling in size with a 2.85-million-square-foot expansion to rank as the fifth-largest industrial development for the rest of the year. Similarly, at 2.8 million square feet, Ultium Cells’ battery plant in Lansing, Mich., stands to be the sixth-largest project.

Meanwhile, the second-largest industrial construction project of the second half of the year after the Hyundai factory is Samsung’s 4.7-million-square-foot semiconductor fab in Taylor, Texas, 35 miles from downtown Austin. Slated for a fourth-quarter opening, the plant is one of the first in a wave of semiconductor facilities aimed at boosting domestic production and improving potential supply bottlenecks. The state-of-the-art facility has already had a huge influence on the roughly 17,000-resident city and the greater Austin area, including an economic contribution of $26.8 billion resulting from the Austin facility.

Up next, two Amazon facilities rank as the third- and fourth-largest completions for the second part of the year. After a pandemic e-commerce building spree and subsequent slowdown, Amazon is once again gearing up its logistical capabilities with multi-million-square-foot fulfilment and distribution centers in key markets. Of these, Project Schooner in Rhode Island and 53 Sturbridge Road in metro Worcester, Mass., stand out at 3.9 million and 2.9 million square feet, respectively.

While logistics and distribution centers are facing lower demand than in previous years, such projects still rank among the nation’s largest — especially those that broke ground when credit was more accessible and vacancies were tighter. Accordingly, multi-building expansions of industrial parks rank as the seventh, eighth and 10th-largest projected industrial completions in the second half of the year.

Lastly, buildings LC3 and LC4 of CloudHQ’s Ashburn Data Center Campus in the Washington, D.C. industrial market completed the list as the eighth-largest completion for the second half of 2024.

Logistics Center Dominate List of Largest Industrial Properties Delivered in H1 2024

While manufacturing spearheads the way for projected H2 deliveries, the first half of the year was primarily taken over by warehouses and logistics facilities. Most of these developments were projects comprising several buildings in industrial parks.

Far ahead of all other developments in the first half of the year in terms of square footage, Buildings 4, 5 and 7 at the Merrill Commerce Center and the development at 8900 Merrill Ave. totaled over 7.5 million square feet of industrial space in Ontario, Calif. Part of the dynamic Inland Empire market, Prologis’ development is bringing a large amount of new high-cube warehouse space as well as other commercial space types.

Across the nation, Buildings 1 and 2 of the Rentschler Field Logistics Center totaled 2.5 million square feet of industrial space that was delivered in Q1 2024 for the second-largest industrial construction project in the first half of the year. After the completion of this initial phase, project owner National Development plans to add 200,000 square feet of high-tech and/or specialty manufacturing space to the center.

Other major projects included expansions of the North Vegas Logistics Center at #3 (2.05 million square feet); 3412 and 3413 Manitou Court in the Inland Empire at #4 (1.94 million square feet); and Buildings 1 through 3 of Vantage North in Las Vegas at #5 (1.8 million square feet).

All other projects in the top 10 are multi-building expansions with the exception of the sixth position, which is occupied by a single property in the Beaumont Crossroads Logistics Park II in the Inland Empire, Calif.

Methodology

All data on markets and individual properties is courtesy of CommercialEdge. Data on projected completion dates of individual properties was extracted on July 19, 2024. The article included industrial construction projects with completion dates in 2024, including properties completed in the first half of 2024 (January 1 through June 30) and properties projected to be completed in the second half of the year (July 1 through December 31).

Some properties listed as being scheduled for completion in the second half of the year may already be completed as of the publishing of this article. While CommercialEdge attempts to ensure data accuracy, final completion and opening dates may differ.

Only industrial properties larger than 25,000 square feet were covered in the report. For mixed-use properties, this includes other commercial real estate types, including office, retail and multifamily space.

In the case of construction projects in the same industrial park, the square footage displayed is the sum of all projects under construction in the same park, regardless of completion date in the same year.