2023 Q4 Occupier Outlook - Industrial
Industrial Market Slows, But Fundamentals Point Higher
The industrial market continues to downshift moving into 2024. Although the vacancy rate is drifting higher, it is not expected to rise above the 20-year average of 7.5 percent. As a record number of deliveries will be made in the next 12- months, landlords will likely have to work harder to either find tenants to both move into newly delivered space or backfill second generation space. A drop in home sales has caused disruptions in retail with stores like Bed, Bath, & Beyond and Ashley Furniture closing distribution centers. The slowdown in new construction will likely stabilize the market in the longer-term. Regardless, the outlook is still positive as consumer spending remains strong and the pull-back of new construction looks to stabilize the broader industrial market.
Industrial Tenant View
- Sublease space is increasing in the market as it has crossed pre-pandemic levels in terms of a percentage of total inventory.
- Second generation space is now becoming more readily available as occupiers move into new space.
- Emerging markets with lower costs such as labor and real estate are becoming increasingly desirable.