The US Industrial Market Staggers but is Well-Positioned for Future Growth
The industrial market has experienced nine consecutive quarters of increasing vacancy rates, shifting conditions closer to a tenant favorable market. Asking rates for warehouse/distribution spaces has slowed to the slowest quarterly increase in the past 10-years. Net absorption, although modest by historical standards, showed its first signs of improvement in more than a year. However, with inflation cooling and additional interest rates anticipated in the next 12-months, consumer spending may push demand for durable goods and manufacturing orders higher, tempering long-term negative impact to the industrial market. Nevertheless, occupiers have a window of opportunity to negotiate more favorable terms, particularly with new supply sharply tapering.
Industrial Tenant View:
- In the near-term, rent growth for small bay and big box logistics sectors will likely slow further.
- Manufacturers, suppliers and 3PLs will follow further declines in inflation and interest rates closely which would help to push home sales and durable goods higher.
- R&D/Flex space demand is increasing as investment through programs like the Chips Act and Inflation Reduction Act begins to be allocated.
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