Tenant demand for industrial space in the United States dropped significantly during the first quarter of 2023, as wholesalers and retailers reconsidered their inventory levels due to economic uncertainty. According to Lee & Associates’ report, net absorption in Q1 totaled 39.4 million square feet, a 57% decrease from the record set one year prior. The U.S vacancy rate settled at 4.4%, much lower than its two-decade average of 7.3%.
Lee & Associates noted that while there is potential for a decline in consumer spending this year which could pose risks, high-tech manufacturing onshoring will likely be an important factor driving absorption between 2024 and 2026 thanks to federal legislation passed last year providing over $400 billion worth of incentives for growth within this sector domestically .
Supply growth is expected to reach its highest rate since 1990 with nearly 4% increase forecasted by end of 2023; however barring any severe shocks or declines in leasing activity it’s unlikely that such volume will lead to significant increases in vacancy rates given current market conditions favoring tenants .
