Industrial Sector Remains Hot, But Signs of a Slowdown Appear
The industrial market is coming up for air after two years of historic growth. As the national vacancy rate remains well-below historic averages, rent growth is beginning to slow. Economic conditions are beginning to signal higher risk for tenant demand, although retail sales have continued to be steady despite inflation increasing the cost of goods. New supply will likely push vacancy higher as new spec development is absorbed in the market. Difficult capital market conditions will limit new construction, keeping the market firmly in landlord favorable conditions.
Industrial Occupier View:
- As variable costs like fuel and commodities increase, tenants are looking to reduce fixed costs like real estate.
- Tenants take a closer look at optimizing their existing footprint as lease rates continue to climb.
- Emerging markets with lower costs such as labor and real estate are becoming increasingly desirable.
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