U.S. industrial market report

Q2 2024

The first half of 2024 continued to show softness in overall leasing, over 15.3% under the pre-COVID 5-year average. Positive momentum is, however, pointing to a strong close to the year as the historic number of deliveries has peaked, and the current construction pipeline drops rapidly to rates not observed since the aftermath of the Global Financial Crisis. The increases in overall vacancy and availability rates nationally are expected to plateau going into the end of the year and begin to decrease starting in 2025 as empty new space is digested throughout the country. Despite the negative data points and potentially concerning narrative around the strength of the overall market, a near-historic start to the year for overall Port activity, historic U.S. manufacturing construction spending that continues to rise, strong pre-leasing activity such as touring and negotiations by occupiers, large amounts of pre-COVID or early COVID lease expirations rolling over in the next 24 months, and signals that most of the surge of new supply hitting markets for the past three quarters is nearly over all point to the fact that data metrics are laggard indicators, indicative of a market 12 months in the past. Market rental rate growth has remained steady, albeit stunted in terms of the COVID-cycle increases, with an expected New Space Gap set to occur at the beginning of 2025. The ongoing threat of labor negotiation disruptions with East and Gulf Coast Port workers whose contract is set to expire September 30th, the heart of holiday preparation season for Supply Chains, is causing an influx of activity within the Ports, positively impacting Industrial demand. Pent-up and historic levels of dry-powder with directives to be deployed into Industrial asset exposure on both the acquisition and development side of the industry continues to await the pivot in policy by the Federal Reserve, knowing a surge of competition is also waiting to make up for lost time and transaction activity.
55.4 msf

First half net absorption is down 43.9% from the 2015-2020 historical average

First half figure has not been this low since the start of 2012 when 50.3 msf was absorbed. A drastic slowdown of new deliveries and pre-COVID tenant rollover are expected to positively impact net absorption in second half of 2024.  

8.1%

Vacancy is up 400 bps from the low point in the cycle of 4.1% in 2022

Vacancy has been driven upward by a surge of new supply delivering while economic uncertainty has led to a slowdown in leasing.

2.6%

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

Since 2006, the average percentage of inventory under construction hovered at 3.1%. Speculative bulk distribution development since 2020 of buildings at least 500,000 sf greatly contributed to the influx of new deliveries and represents the highest vacancy rates nationally.  

-55.8%

Current construction pipeline compared to peak in third quarter of 2022

The historic surge of new deliveries has peaked and has not been replaced for nearly six quarters. The pipeline of bulk distribution buildings at least 500,000 sf is significantly smaller than it was at peak. This may lead to supply and demand imbalances in certain size segments over the next 12-24 months.  

$234.1B

Amount of Total U.S. construction spending on Manufacturing

Surging from $78.8B to start 2020, U.S. Manufacturing construction spending continues to benefit from reshoring and near-shoring efforts that have been in progress since before COVID. As these projects complete, additional complimentary Industrial demand is expected to rapidly drive absorption across the U.S.  

For more information, contact:

  • Director, Industrial / Supply Chain & Logistics Market Intelligence
  • Industrial, Market Intelligence, Strategic Business Advisory

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

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