Q4 2024 Occupier Outlook - Industrial

The US Industrial Market is in a Holding Pattern, but Positioned for Growth

With the tenth consecutive quarter of rising vacancy, industrial market conditions have shifted in the tenants’ favor. While net absorption remained modestly positive during the fourth quarter, demand has slowed as occupiers that jumped into the fray during peak demand in the early stages of the pandemic reassess their future demand. Tenants with space requirements are taking longer to make decisions because of more choices. Additionally, many of the largest US industrial distribution tenants are expressing concerns over how increased tariffs could impact their customers. The lackluster demand has caused asking rates to stall and even retreat in some markets, increasing the willingness of landlords to negotiate terms. However, US imports, business inventories, and real goods spending remains strong, signaling a limited opportunity for tenant leverage.

Industrial Tenant View

  • The small bay industrial market is outperforming logistics properties 100,000 square feet or larger, with vacancy below 4%.
  • Despite slowing asking rates, because of the steep rent increases in 2020 – 2023, tenants are still looking at renewing at over 40% of their previous rates.
  • New construction starts have dropped to 10-year lows, older less amenitized buildings with lower clear heights and inadequate power supply will likely be more exposed to leasing difficulties.

 

Download the full Q4 industrial report to learn more.