Top 10 US Cities Dominating Industrial and Multi-Family Construction
By: Mark Hofmann, Executive Director of Commercial Construction
While Building Design + Construction's 50-year market analysis provides valuable historical context, today's construction landscape tells a different story. Drawing on four decades of commercial construction leadership and real-time intelligence from developers across the country, I'm revealing where the real opportunities lie in 2025 — and some of the findings might surprise you.
Top 5 Cities for Industrial Construction
Savannah, Georgia
Key Stat: Increase of inventory 5.3 million square feet in 2024 Q2 alone!
Vacancy Rate: Currently 8% up from 4.5% in Q2 of 2024 with more than 12 million square feet planned and/or under construction.
Build to Suit vs Spec Builds: Speculative builds account for over 66%, and 34% coming online as Build-to-Suit projects.
Mark's Take: With a net absorption of over 5 million square feet in Q2 of 2024, Spec builders remain upbeat on the Savannah region. The Port of Savannah remains the largest container terminal facility in North America, with an emphasis on products/materials coming from Southeast Asia, make this port a distribution behemoth.
2. Dallas-Fort Worth, Texas
Key Stat: 30.9 million square feet of industrial space delivered in 2024
Growth Driver: Strategic central location serving both coasts
Strength: Dallas-Fort Worth remains a leading industrial hub.
Mark's Take: Although this market has seen a decrease in industrial construction in the previous 2 quarters, the slow-down will allow for needed absorption, dropping the current 9.8% vacancy rate to a more palatable 6.5% - 8% rate. Additionally, Dallas-Fort Worth benefits from what I call the 'perfect development triangle'—favorable regulations, abundant land, and sophisticated capital. The differentiator here is speed-to-market. Our Dallas projects consistently deliver 15-20% faster than comparable developments in more regulated markets, creating significant value for industrial clients whose business models depend on rapid deployment.
3. Phoenix, Arizona
Key Stat: Phoenix added 34.3 million square feet of industrial inventory in 2024
Corporate Outlook: Intel, Virgin Galactic, TSMC have relocated here finding an open business environment and plentiful labor force.
New Leasing: The Phoenix industrial market saw a 10% year-over-year increase in leasing activity.
Mark's Take: Phoenix exemplifies the resilience of established industrial corridors when they adapt to modern logistics needs. What's fascinating is how the area has transformed from traditional manufacturing to one that has embraced e-commerce distribution. Phoenix represents the clearest example of the 'California exodus' effect in industrial real estate. What's not widely recognized is how water availability is becoming a critical factor in site selection. Projects with secured water rights are commanding significant premiums, especially for manufacturing uses.
4. Atlanta, Georgia
Key Stat: Industrial absorption of 8.1 million square feet in 2024 with a rent increase of 5.6% year-over year.
Air Freight Connection: Hartsfield-Jackson provides unique logistics capabilities
Advantage: Unemployment rate at 3.6% and low residential rent rates means Atlanta is set for anticipated population growth
Mark's Take: Rent rates are expected to climb as inventory is absorbed. Atlanta has leveraged its distribution infrastructure masterfully. What's particularly interesting is how industrial development has spread from Central Atlanta along the I-85, I-75, I-285, I575, I985, I-675 and I-20 corridors. This pattern demonstrates how logistics hubs create spillover effects that transform outlying areas. We're advising clients to look at these secondary markets where land costs remain reasonable yet accessibility rivals primary markets.
5. Chicago, Illinois
Key Stat: in 2024 Chicago had the highest YTD net absorption of industrial space at 15.1 million square feet
Logistics Advantage: Intersection of 7 Class I railroads
Submarket Performance: O'Hare submarket commands 28% premium over regional average
Mark's Take: Chicago exemplifies the resilience of established industrial corridors when they adapt to modern logistics needs. What's fascinating is how the I-55 Corridor has transformed from traditional manufacturing to e-commerce distribution. The most successful developers here have focused on clear height and trailer storage—two features that consistently deliver outsized returns in Chicago's competitive industrial market.
Top 5 Cities for Multi-Family Construction
1. Austin, Texas
Key Stat: 5.3% annual rent growth over the past decade, nearly double the national average
Absorption Power: New units leased 37% faster than national average
Development Focus: 68% of new construction in urban core and East Austin
Mark's Take: Austin's multi-family market is a textbook example of demand-driven growth, but location within the metro has become increasingly crucial. The eastern expansion of the urban core has created extraordinary opportunities, but we're seeing signs of potential overbuilding in specific submarkets. The key differentiator for successful projects has been amenity innovation—Austin renters expect significantly more community features than comparable demographics in other markets.
2. New York City, New York
Key Stat: Boasts most multi-family starts in 2024 by a factor of 2X
Renter Demographics: Historic rental market holding steady 2.1% vacancy rate
Cap Rate Advantage: Although somewhat subdued, average of 50 basis points below comparable markets
Mark's Take: Exemptions for properties built after 2009 or with rents 245% above fair market value will likely boost demand for newer assets. According to Marcus & Millichap, large investors are expected to partner with developers to capitalize on the anticipated surge in multi-family construction driven by YES Plan zoning reforms.
3. San Diego, California
Key Stat: Average annual ROI 2.3% higher than national average
Geographic Constraint: Developable land limited by ocean, mountains, and international border
Premium Factor: Climate and recreation support rent premiums 1.7% above inflation since 1975
Mark's Take: San Diego exemplifies how geographic constraints create long-term value for multi-family investors. The limited supply virtually guarantees performance across market cycles. What's particularly interesting is how in response to its impacted housing market, San Diego has embraced density more successfully than many comparable coastal markets. Projects that thoughtfully increase unit count while maintaining livability metrics have generated extraordinary returns.
4. Raleigh-Durham, North Carolina
Key Stat: 15,812 units absorbed in Q4 of 2024, with occupancy rates around 94% in Q4
Employment Driver: Research Triangle Park creating high-income renter pool,
Development Pattern: The Triangle and Central Raleigh outpaced all other areas, with absorption outpacing completions
Mark's Take: The Raleigh-Durham market demonstrates how knowledge economic growth translates to multi-family performance. The research and education sectors create ideal renter demographics. We're particularly bullish on projects that connect to the area's outdoor amenities—the greenway system has become a major value driver, with properties having direct access commanding significant premiums.
5. Chicago, Illinois
Key Stat: Specific Chicago submarkets consistently outperform national benchmarks by a double-digit margin
Institutional Preference: 37% of properties valued over $10M held by pension funds and insurance companies
Steady as She Goes: Occupancy rates are hovering around 95%, with a ten-year average of 93.7%
Mark's Take: Chicago remains America's most underrated multi-family market. While citywide metrics appear modest, dig into the submarkets and you'll find a goldmine of opportunity. The West Loop and South Loop transformations have already delivered exceptional returns for early investors. Now, we're seeing history repeat itself with the 1901 project near the United Center—a complete neighborhood reimagining that promises to be the next decade's great success story. What makes Chicago truly unique is its proven track record with adaptive reuse. Time and again, we've seen thoughtful conversions outperform new construction in comparable locations. This city doesn't just build buildings; it masterfully reinvents neighborhoods.
Mark's Analysis: Key Trends Shaping These Markets
The Bifurcation of Industrial Development
The most compelling trend across top industrial markets is the growing separation between large-scale distribution centers and smaller last-mile facilities. These property types now follow entirely different location patterns and construction standards. In the Inland Empire, we're seeing 1M+ square foot facilities that essentially function as automated goods processors, while urban infill in Chicago and Phoenix focuses on smaller facilities optimized for rapid deployment. This bifurcation is transforming how we approach industrial construction, with technology integration becoming the key differentiator in larger facilities.
The Amenity Arms Race in Multi-Family
The definition of 'amenity' has fundamentally changed across all multi-family markets. What was considered luxury five years ago is now standard. In Nashville and Austin particularly, the focus has shifted from internal unit amenities to community features that create authentic experiences. Co-working spaces have evolved from afterthoughts to central design elements. The most successful developers are thinking like hospitality providers, creating programming that drives community engagement. This approach requires significantly more operational sophistication but delivers measurable rent premiums.
ESG as a Market Differentiator
Environmental, Social, and Governance factors have moved from nice-to-have to essential across both industrial and multi-family sectors. San Diego and Chicago lead in implementing sustainable building practices that deliver measurable operational savings. What's particularly notable is how quickly sustainability features have transitioned from marketing tools to fundamental economic drivers. Projects with documented energy efficiency, particularly those achieving net-zero status, command cap rate advantages that more than offset the additional construction costs.
The Role of Construction Technology
The top-performing markets have embraced construction technology at significantly higher rates than secondary and tertiary markets. BIM coordination, modular components, and enhanced quality control through digital tools are standard practices in these competitive environments. This technology adoption creates a virtuous cycle—the efficiency gains make these markets even more attractive for further development. At Richard, we've found that markets like Raleigh-Durham and Phoenix are particularly receptive to innovative construction approaches that compress schedules and enhance quality.
Looking Ahead: Markets to Watch
While these top markets will likely maintain their leadership positions, we're closely watching several emerging areas. Salt Lake City is rapidly ascending in both industrial and multi-family categories, with fundamentals that mirror early-stage Austin. Columbus, Ohio has quietly assembled the logistics infrastructure to challenge Chicago for regional distribution dominance. And Madison WI's multi-family market is benefiting from demographic shifts that mirror Nashville's early growth phase.
Our research tells us to anticipate that nearly 75% of the different types of U.S. commercial construction will experience strong growth in 2025 and beyond. This growth is driven by a predicted 56% increase in military project spending, an almost 28% rise in hotel projects, and a projected 25% increase for physical shopping and retail, with newly projected mega-projects keeping the manufacturing sector strong.
We experienced the military sector struggles last year, and hotels and motels had a similar experience. Some areas where we saw weaknesses in ’24 are expected to see strong rebounds in ’25. Conversely, some areas that experienced growth in 2024 will likely see declines in projects next year, forcing the construction industry to adapt to evolving political and economic conditions.
At Richard, we are adopting a more flexible and tech-centric approach that is based on knowledge of historical challenges, while understanding leading indicators to better manage risk and outcomes.
The half-century of data reveals one consistent truth—markets that combine population growth and economic diversification consistently outperform over multiple cycles. The winning formula hasn't changed, but the specific markets embodying these characteristics continue to evolve.
Author: Mark Hofmann, Executive Director of Commercial Construction
Mark Hofmann, Executive Director of Commercial Construction
Mark runs our San Diego office overseeing major commercial projects across the United States. With over 40 years of industry experience, he specializes in optimizing construction approaches for maximum ROI across different market types.