Q4 2024 U.S. industrial market report

The year 2024 could best be described as the epitome of “wait and see” as it pertains to industrial demand and decision making. Expectations of ongoing effective funds rate cuts, a quick resolution to port worker contract negotiations, a consistent drop in the CPI, and election certainty for the next two to four years influenced decision makers to pause plans cast at the beginning of the year. A continued slowdown in deliveries coupled with limited new groundbreakings allowed markets to digest vacant space that has been forcing vacancy and availability rates upward throughout the country. However, the second half of 2024’s gross leasing ramped up to help vacancy rates plateau going into the new year. A new space gap is expected in late 2025 as decisions that have been tabled for nearly two years are now being implemented, with economic and trade policy factors more certain after the election. Investors, developers, and debt providers were weary to start the year as the 10-year decoupled from the effective funds rate; however, rates are now back to post-election levels and continue to decline, enhancing the attractiveness of underwriting and deal making. We expect a big year for the industrial capital markets as capital has remained sidelined for over 20 months. 
121.9 msf

Q4 absorption was down 46.1% from the 10-year historical average

The year-end figure has not been this low since 2010, when only 62.6 million square feet (msf) was posted. Every quarter remained positive despite a record flooding of new speculative deliveries that hit the market in 2023 and 2024.
8.7%

Vacancy was up 4.6% from the low point in the cycle of 4.1% in 2022

The steep climb in vacancy was almost fully driven by a surge of new supply that delivered and coincided with a slowdown in leasing. A positive trend is that vacancy rose at its slowest level the last two quarters of 2024, indicating a plateauing and possible reversal in the first half of 2025.
2.2%

Current inventory under development, down from the peak in late 2022 of 6.5%

Over the last 20 years, the average percentage of inventory under construction hovered at 3.1%. Current levels continue to trend downward as new groundbreakings remain scarce and are expected to decrease below 2% in early 2025, reaching new post-Global Financial Crisis levels. 
-3.1%

Gross industrial leasing was on par with pre-COVID five-year average by year end

Despite concerns of slowing demand, overall leasing volume for 2024 was only slightly lower compared to historical levels. With the election now finished, clearer economic conditions and increasing occupier requirements are likely to translate to upticks in overall gross leasing activity in the start of 2025.
+20%

Amount the largest U.S. ports are up over 2023 TEU total activity, approaching record highs after subdued 2023

This increase in activity is expected to drive demand for warehousing and storage in coastal markets and inland port distribution hubs. The September East & Gulf Coast port labor contract was resolved in mid-January, so stability for years is now expected for users. A shift toward continued importation of manufacturing components supporting U.S.-based manufacturing will ramp up in 2025.

For more information, contact:

  • Director, National Industrial, Market Intelligence
  • Industrial, Market Intelligence, Strategic Business Advisory

  • Manager, Market Intelligence
  • Industrial, Logistics, Market Intelligence

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