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Q2 2024 Occupier Outlook - Industrial

Industrial Trends

Construction Starts Fall Dramatically as Developers Navigate Leasing of Existing Inventory

The second quarter of 2024 continued the trend of tepid growth within the U.S. industrial sector as occupiers look to navigate the fallout of significant investing during pandemic and softening consumer demand. A wave of new construction deliveries has placed a significant amount of space on the market, slowing several years of rent increases. While asking rates are not expected to drop, the growth rate is slowing to levels not seen since the end of the Great Recession. There are signs that this lull is likely only temporary as real U.S. business inventories and good imports that spent most of last year in decline have resumed growth in recent months meaning the volume of goods flowing through distribution centers across the U.S. is back on the rise.

 

Industrial Tenant View

  • Tenants have a window to negotiate, particularly for early renewals as new supply additions will increase vacancy in the near-term and cause rent growth to decelerate further, 2024 rent growth is on pace to register the slowest growth since 2012.
  • While overall space availabilities are growing, demand for mid-size spaces in the 75,000 to 150,000 range continues to grow, as occupiers move away from spaces 300,000 square feet and larger.

 

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