Nationwide Industrial Trend - Vacancy increases among new projects

 

After years of rapid growth, the industrial market became imbalanced last year, with new development far outpacing occupancy gains according to a recent report from Colliers, an overview can be found below and article attached here. We will provide the basics and our insights on the issue as well. 

A record 607M SF of new industrial projects delivered across the country last year, while the U.S. saw 231M SF of positive net absorption, according to Colliers Q4 2023 Industrial report. Nationwide vacancy rose by 194 basis points to 5.5%, the highest rate since 2016.

"New supply nearly tripled demand, as measured by net absorption during 2023, pushing vacancy higher in every region of the country and across nearly all industrial markets".  

The five largest industrial markets all saw spikes in vacancy: Greater Los Angeles' vacancy rate rose 256 basis points to 3.4%, Chicago's rose 75 basis points to 5.3%, Dallas-Forth Worth's rose 335 basis points to 8.5%, New York City's rose 183 basis points to 4.7% and Atlanta's rose 290 basis points to 6.6%. 

Though Dallas-Fort Worth saw some of the biggest vacancy rate increases, it also had the most positive net absorption with 28M SF and the most product under construction in Q4 with 40M SF. 

The fastest-growing markets in the country included Savannah, which saw 17% supply growth last year, followed by Charleston at 14.7% and Austin at 13%.

However, slowing construction starts should help bring supply and demand back into balance, Colliers' report said: 80M SF of new projects started during the second half of 2023, down 76% from the same period in 2022.

Weitz Commercial: This will be an interesting trend to keep an eye on. The industrial sector has been considered one of the safest sectors of the market for years thus a vacancy increase like this is a nothing to take lightly. That said, the modest amount of new products this year will hopefully offset the current vacancy rate, but alternatively provides a perhaps scary precursor for what we perceive is and will be a fairly dramatic slowdown in CRE building across many of the sectors. 

For more information on Snohomish County Commercial Real Estate, consider contacting a Snohomish County Commercial Real Estate Broker. 

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Scott@WeitzCommercial.com
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