Hot Industrial Real Estate Markets Based on Job Growth Projections

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The work experience has shifted since the onset of COVID-19. Work-from-home, work-from-anywhere, and hybrid schedules are driving high office vacancy rates. Many companies employing office workers have hiring policies with few geographic and infrastructure constraints. There is workforce growth in health care, hotels, etc., but the product mix is specialized and from a macro lens, less driven by where the talent is located. However, industrial operations and specifically manufacturing and warehousing, only operate with workers on-site.

Industrial operations have both geographic and infrastructure requirements that require careful consideration of where talent is located. This report examines talent/workforce as the demand side of real estate; the driving force behind future industrial development. We will address two questions: What industries are growing jobs? Where is the workforce to support those industries?

What industries are growing jobs?

To stay focused on the real estate product mix that will require people on-site we’re focused on two major industry categories: 1) Transportation and Warehousing, and 2) Manufacturing. Within these two groupings, we have carefully selected sub-industries that fit within the desired real estate product type.

1. Transportation & Warehousing

• General warehousing and storage
• Couriers and express delivery
• General freight trucking
• Local messengers and local delivery
• General freight trucking long distance, less than truckload.

2. Automobile & Battery Manufacturing

• Automobile
• Light truck and utility vehicle
• Storage battery

Where is the workforce to support those industries?

Transportation & Warehousing

28,657 RIVERSIDE–SAN BERNARDINO–ONTARIO, CA

The Inland Empire went from the 8th largest market in 2008, based on jobs in Transportation & Warehousing to the 2nd largest market in 2023. It has grown 4x its 2008 size. That rapid growth is driving some users to grow into Phoenix, Las Vegas, and California’s Central Valley. Hickey’s soon-to-be-released report on the Inland Empire will provide more insight into this popular location.

26,471 NEW YORK–NEWARK–JERSEY CITY, NY-NJ-PA

The highest concentrated consumer demand alongside the largest east coast container port drives growth in Transportation & Warehousing jobs. It is second for job growth but remains in the #1 spot for the total number of Transportation & Warehousing jobs.

23,659 LOS ANGELES–LONG BEACH–ANAHEIM, CA

The Ports of Long Beach and Los Angeles are the gateway from Asia into the U.S. Workforce is becoming as hard to find as real estate.

22,201 DALLAS–FORT WORTH–ARLINGTON, TX

Dallas has overtaken Chicago for the number of jobs in Transportation & Warehousing and is projected to grow at a higher rate.

18,582 CHICAGO–NAPERVILLE–ELGIN, IL-IN-WI

In 2018 Chicago had 116,000 Transportation & Warehousing jobs (within the selected industries) and Dallas had 108,200. By 2023, Chicago was only up to 171,400 while Dallas rose to 177,200.

16,153 PHOENIX–MESA–CHANDLER, AZ

Phoenix is #10 for the total number of Transportation & Warehousing jobs, but it is projected to add more jobs in the next five years than Houston, Atlanta, Miami, or Philadelphia. The next four on the list, Atlanta, Houston, Miami, and Philadelphia, all have a sizable base of jobs and are projected to grow. The flattest growth is Atlanta at 9.3%, however, relative to the overall job market, Dallas is not adding as many Transportation & Warehousing jobs as any of the Top 10 (Location quotient is projected to drop 1.2%).

Logistics have historically been the #1 driver in selecting a warehouse site. However, it has become so difficult and expensive to hire and retain people, that workforce is a growing priority and may shift a user’s location decision.

Automobile & Battery Manufacturing

The motor vehicle & storage battery industries are much more nuanced than transportation & warehousing: 1) It is much more concentrated (higher location quotient). Meaning that this industry has large sites with large workforces. It is typical that one company dominates a market. 2) The development of these sites is highly specialized and entirely bespoke. The metro markets with the highest straight growth:

6,430 SAN FRANCISCO-OAKLAND-BERKELEY, CA

San Francisco is dominated by automotive that is technology related; machine learning, artificial intelligence, etc. One big company is Tesla, who retains a presence, but announced a relocation to Austin.

3,242 READING, PA

Reading, PA is home to the world’s largest single-site, lead-acid battery manufacturing facility, East Penn Manufacturing.

2,825 RENO, NV

Tesla dominates the Reno market with 6,000+ employees.

2,141 DETROIT-WARREN-DEARBORN, MI

Home of the Big three automakers, Detroit has the largest motor vehicle manufacturing workforce in the U.S. The engineering, assembly, and technologist workforce in Detroit is second to none.

1,055 TUSCALOOSA, AL

Mercedes-Benz is the second largest employer in Tuscaloosa with 4,500 workers (behind the University of Alabama).

Job growth is a clear indicator of what industries are growing. However, it doesn’t capture which industries are seeing the most expansion. As automation becomes a bigger part of expansion and onshoring/reshoring/nearshoring, expansion will occur with investment, but not jobs. We’ve identified industries that are adding jobs, and while some industries are expanding without adding jobs, those industries adding jobs must expand their footprints. Our analysis shows which metro markets are adding the most jobs and will require real estate expansion to accommodate those jobs. There is a whole host of decision criteria that affect a corporate location decision. We’ve identified the need (demand) for real estate and the next step is to understand the supply of real estate.