The latest Q2 2024 reports and analyses on the industrial sector have revealed a concerning trend: a decline in new projects and an increase in vacant spaces. This has resulted in slower absorption rates compared to the previous year. According to Lee & Associates’ Q2 2024 North America Market Report, this downward shift is evident across North America. Similarly, Savills’ State of the U.S. Industrial Market Q2 2024 Report also noted that supply correction is necessary for demand recovery as consumer spending decreases.
Mixed Absorption Data
Despite an almost double increase in absorption during Q2 compared to Q1, CBRE’s report stated that year-to-date (YTD) numbers were down by 50% from last year’s figures. Cushman & Wakefield’s National Industrial MarketBeat Report for Q2 also supported this finding by stating that most of the net absorption was due to tenants moving into newly completed buildings.
Lee & Associates analysts predict slow annual growth rates similar to those seen during recession periods due to high supply levels surpassing demand even with fewer construction starts and deliveries.
Rising Vacancies and Rents
Colliers’ U.S Industrial Market Statistics for Quarter Two echoed other reports by highlighting vacancy increases across all regions but at a slower pace as quarterly construction completions decrease while demand picks up again.
The continuous influx of new properties has contributed significantly towards lower absorption rates and declining rent growth trends within the industry according Plante Moran’s Real Estate/Industrial Quarterly report forQ22024 . However, they did mention that although we are approaching record-breaking development phases soon enough; these expected deliveries will lead vacancies higher before stabilizing rental prices around their lowest point since2015 .
Future Prospects
All reports agree on one thing -the industrial market will experience moderation after its volatile performance over recent years.Plante Moran predicts below average quarterly net supplies until late next quarter when it could reach ten-year lows. CBRE also shares this sentiment, adding that the expected decline in construction completions from Q3 2024 onwards will help ease supply-side pressures.
Savills’ analysts estimate it will take an average of two and a half years to clear the current space glut and return to pre-pandemic vacancy levels with significant variations across regions. However, Cushman & Wakefield’s report offers a slightly different perspective by highlighting potential growth opportunities through e-commerce expansion, onshoring, and nearshoring activities despite rising vacancies in the first half of 2025.
In conclusion,Q2 has shown signs of an industrial market approaching its cyclical bottom as supply continues to outpace demand. While consumer spending stagnation may pose challenges for net absorption rates in the short term, there is still hope for future growth through reshoring high-tech manufacturing back into the United States. Overall,the outlook remains moderate but with potential opportunities emerging over time.
