The 10 U.S. Markets with the Lowest Logistics Yields

With the continued growth of the e-commerce sector, logistics facilities appear to be among investors’ favorite asset types at the moment. According to a recent report from real estate services firm CBRE, in the third quarter of 2016, the U.S. industrial market was benefitting from tight supply and rising rents. To track the most in-demand markets, CBRE put together a list of cities and regions with the lowest prime yields on logistics assets (the average prime yield for the U.S. is currently 5.84 percent). Here is a list of markets that made the list.

1. Houston

Prime yields on logistics properties in Houston rose 25 basis points year-over-year, but are still below the national average at 5.50 percent.

2. South Florida

Yields in South Florida average 5.50 percent as well, though the figure represents a 50 basis point increase compared to the third quarter of 2015.

3. Atlanta

Yields on logistics assets in Atlanta, on the other hand, declined 25 basis points, to 5.25 percent.

4. Dallas/Ft. Worth

Dallas also experienced an uptick in its prime yields of 15 basis points, ending third quarter of 2016 with an average yield of 5.00 percent.

5. Chicago

Logistics yields in Chicago declined 25 basis points, to 5.00 percent.

6. Seattle

A booming tech economy has kept developers interested in building apartments in Seattle, perhaps too interested. “The volume of new supply has dampened rent growth,” says Greg Willett, chief economist with RealPage Inc., a provider of property management software and services.

Seattle is the only city on CoStar’s list of top cities for new development where rents fell over the year the ended in the third quarter on 2018. It is number five on CoStar’s list of top markets for new development.

Developers had 24,388 new units of multifamily housing in some phase of the development process in Seattle in the third quarter of 2018, according to CoStar. That works out to 7.7 percent of the current inventory.

MPF counts 15,986 new rental apartments under construction in the Seattle metro area. That’s equal to 4.8 percent of the inventory across the broader metro area, making it tie with Charlotte, N.C. for number three on MPF’s list of top markets for new construction.

7. Oakland, Calif.

The Oakland market saw yields decline 50 basis points year-over-year, to 4.25 percent.

8. Los Angeles/Orange County

Los Angeles experienced the same dynamic, with a 50 basis point drop in yields to 4.25 percent.

9. Inland Empire

In Inland Empire, yields went down 25 basis points, to an average of 4.25 percent.

10. New Jersey

This Northeast market also saw yields decline 25 basis points, to 4.25 percent.