In the early 2020s, the industrial sector experienced a surge in tenant demand, with record-high construction and deliveries leading to tightening vacancy rates and increased absorption. However, recent Q4 reports have shown a decline in absorption, construction starts, and an increase in vacancy rates due to an influx of supply entering the market. Looking ahead to 2024, experts predict that it will be a year of stabilization for the sector.
Looking back at 2023’s performance according to Colliers , there was a shift from high demand for industrial space towards supply outpacing demand. This was reflected across various reports which noted decreased leasing activity and net absorption as well as falling construction starts. CBRE attributed this slowdown to concerns about economic conditions such as interest rates and consumer spending habits while Lee & Associates pointed out that declining imports and reduced sales also played a role.
Despite these challenges faced by the industry last year, Cushman & Wakefield reported that occupancy remains tight with vacancy rates still below pre-pandemic levels. Looking forward into 2024’s forecasted trends by various sources including Plante Moran , Lee & Associates , Cushman & Wakefield , Colliers , Savills , CommercialEdge – it is predicted that vacancies will continue increasing at least through mid-2024 despite low levels of new constructions starting up again after hitting decade lows last year.
However some markets may become constrained due to limited availability caused by shrinking pipelines coupled with strong tenant demand driving up rental prices . While overall growth may slow down compared previous years’ rapid pace; there are positive signs indicating potential future expansion driven mainly manufacturing reshoring/nearshoring efforts which could lead next cycle’s expansion but not yet seen until later on during long-term impact period according CommercialEdge .
Overall though expect occupier market conditions throughout much if not all upcoming months before eventually shifting towards landlord favorability once more when main driver behind current strong tenant demands remain intact even as manufacturing reshoring/nearshoring efforts continue to take hold. In summary, the industrial sector is expected to see a period of normalization and stabilization in 2024 before potentially entering into another cycle of expansion driven by manufacturing comeback.
