In this final installment of a three-part industrial series prior to the release of the Q3 2018 U.S. Industrial Report and Outlook, we look at overall industrial fundamentals. Led by insatiable demand from the third-party logistics and packaging industry (3PLs), industrial activity surged in the third quarter with 76.5 million square feet of the net absorption — the third-highest quarter on record. This brought year-to-date overall net absorption to 203.6 million square feet, an impressive 11.3% higher than this time last year. With this activity, the market is well on its way to having its second-best year ever for occupancy gains.
Robust demand dropped the overall vacancy rate to 4.9%, marking the first time that the U.S. industrial market has posted a vacancy rate under 5%. Continued robust activity and record low vacancies are driving up asking rents, which finished Q3 2018 at an all-time record of $5.91 per square foot per year for warehouse/distribution space. Developers are also breaking ground for new industrial product at a record pace, with 267.6 million square feet in development.
The Inland Empire continues to dominate as the top market with year-to-date activity at 19 million square feet of net absorption for the year. This is followed by Atlanta, who led the nation in Q3 2018 with 7.2 million square feet of net absorption, bringing its year-to-date total to 14.6 million square feet. Dallas-Fort Worth comes in third at 13.3 million square feet, followed by Chicago at 13 million square feet. Indianapolis is the top performing emerging market in the country with year-to-date net absorption of 7.6 million square feet, the sixth highest in the U.S.
Savannah, one of the fastest growing seaports in the country, remains the top growth market (net absorption as a % of inventory) in the country, growing by 6.1% year-to-date. This is followed by other major inland ports or final-mile markets including Stockton, New Hampshire, the Inland Empire and Lehigh Valley as the top growing activity markets in the U.S.
As we look ahead, the short-term forecast for industrial real estate is robust thanks to a strong U.S. economy as well as the continued growth in e-commerce sales. In the long run, there are headwinds to look out for including trade and potential labor shortages. We will dive deeper into this as well as other trends impacting the U.S. industrial market in our soon-to-be-released Q3 2018 U.S. Industrial Report and Outlook.