The industrial sector of commercial real estate has experienced a surge in demand, low vacancies, and record absorption over the past two years. However, recent data from Q3 2023 shows a slowdown due to an increase in supply and cautious tenants.
According to Colliers’ U.S. Industrial Market Statistics, the vacancy rate for industrial properties has risen for five consecutive quarters due to record new supply and normalizing demand. Cushman & Wakefield’s U.S. National Industrial MarketBeat also reports that Q2 saw the highest amount of new construction delivered on record. Despite this influx of supply into the market, Plante Moran’s U.S. Industrial Real Estate Market Summary notes that it has not significantly shifted in favor of tenants.
On the other hand, Plante Moran suggests that concerns about economic stability and high levels of incoming supply have caused a slowdown in activity within the industrial sector since its peak during the pandemic period. JLL’s Industrial Outlook states that many potential users are either delaying or taking longer to finalize deals as they assess various outcomes.
Moreover, rising labor and material costs have led to slower construction rates while higher interest rates may potentially decrease property values below replacement costs according Lee & Associates’ North America Market Reports.
Experts predict an increase in vacancy rates as rent growth slows down with more new developments coming online over approximately 17 months ahead.While leasing activity is expected slow down throughout this year into early 2024,the strong demand for Class A logistics facilities remains steady according analysts at Cushman & Wakefield .
Lee & Associates analysts also anticipate increased demand from high-tech manufacturing companies reshoring operations between now until mid-2026.Additionally,JLL experts believe it will remain favorable conditions for landlords despite ongoing deliveries .
