So what's the catch? Record amounts of industrial product is available in 2023 & 2024

While asking rates are still rising, absorption is tumbling and record amounts of industrial product are being brought to the market in 2023 and 2024, vacancy rates are increasing.? Even so, more space is being constructed - the DFW area has, by far, the most total square footage of industrial space under construction (55M) with Phoenix being the next highest (46M).?

The latest vacancy rate in the US industrial market rose to 4.7% in Q3, up from 4% the previous quarter and 3% during the same period last year.? Meanwhile, construction completions increased by 19.6% on a quarterly basis, resulting in a record 171.8 million square feet of supply delivered in Q3.? Despite this influx of new construction projects entering the market, overall absorption remained positive, with 46.2 million square feet of net absorption nationally in Q3.

Even though a significant amount of supply is still to be delivered, there is a slowdown in development starts due to increasing interest rates and difficulty for developers to obtain financing.? However, we are still seeing landlords hold fast on their quoted rental rates.? Where we are seeing some give is in tenant improvements and free rent offered.? Landlords are finally decided that renting at less than their desired rate is preferably to empty buildings.

Another point to the industrial market is the potential shift towards manufacturing, driven by recent federal legislation.? Think onshoring and nearshoring of projects like semiconductor fabs or battery plants.? Demand trends are leaning toward high-ceiling logistics facilities catering to third-party logistics and e-commerce tenants. These uses continue to drive demand nationally, with third-party logistics accounting for 25% to 35% of overall leasing activity.

What will the future hold industrially?? Stay tuned…..

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REATA Commercial Realty, Inc. is a user advisory firm exclusively representing companies and non-profits in real estate decisions - new leases, expansions, renewals, renegotiations, purchases, and dispositions of excess space. After 20 years representing landlords of office buildings throughout the US, Bob Gibbons left the landlord side of the business in 2004 to exclusively serve users.