The industrial sector experienced a surge in tenant demand, construction and deliveries, as well as tightening vacancy rates and absorption during the early 2020s. However, recent Q4 reports have shown a decline in absorption, construction starts and an increase in vacancy rates due to supply currently making its way through the pipeline. Experts predict that 2024 will be a year of stabilization for the sector.
Looking back at 2023, it was evident that after two years of high demand for industrial space, supply and demand fell out of balance. This was reflected by decreased leasing activity, reduced net absorption and falling construction starts according to Colliers. The economy’s uncertainty caused many occupiers and investors to decrease their activity last year.
Despite these challenges faced by the industry with rising vacancies and declining absorption levels , occupancy remains tight with Cushman & Wakefield reporting a lower than average vacancy rate compared to pre-pandemic levels.
Experts forecast that vacancies will continue to rise throughout the first half of 2024 despite low construction starts over recent years . Plante Moran notes that new deliveries could impact this trend within six-nine months as developers seek efficiency through major constructions projects on properties larger than 500k square feet .
Colliers predicts slowing economic growth but also anticipates moderating inflation which has resulted in cautious optimism from investors regarding potential recession concerns . As such some markets may become constrained due to shrinking pipelines while others may see an increase in momentum towards recovery according Cushman & Wakefield .
While Savills expects strong tenant demands driven primarily by manufacturing comeback leading into next cycle expansion , CommercialEdge suggests long-term impacts from reshoring or nearshoring won’t be seen until later down line post-2025.
In summary,the industrial outlook for upcoming years is one marked by normalization efforts aimed at stabilizing market conditions following previous periods characterized by high demands.This period saw record-high constructions,demanding tenants,tightening vacancy rates,and soaring absorption levels.However, recent Q4 reports have shown a decline in absorption,construction starts,and an increase in vacancy rates due to supply currently making its way through the pipeline.Experts predict that 2024 will be a year of stabilization for the sector as vacancies continue to rise and construction starts remain low.Despite these challenges faced by the industry with rising vacancies and declining absorption levels , occupancy remains tight with Cushman & Wakefield reporting a lower than average vacancy rate compared to pre-pandemic levels. As such,some markets may become constrained due to shrinking pipelines while others may see an increase in momentum towards recovery according Cushman & Wakefield . While Savills expects strong tenant demands driven primarily by manufacturing comeback leading into next cycle expansion , CommercialEdge suggests long-term impacts from reshoring or nearshoring won’t be seen until later down line post-2025.
