The rise in vacancy rates in the industrial sector amid slowing demand and the wave of new supply, which will come to market over the next year, is the key macro trend for 2024, according to a new report from Jason Price, Senior Director, Americas Head of Logistics & Industrial Research, Global Research, US, C&W*.

“The industrial market has seen its fundamentals shift over the past year as we have registered record new supply, moderating absorption totals, and climbing vacancy rates across many markets,” said Price, in a company forecast video.

The trend stands out to Price mostly because the continued upward trajectory of vacancy rates should have occupiers finding a slightly easier market to navigate for the short term, coming off those record lows achieved in 2022, he said. Despite this vacancy rate increase, the overall rate is expected to remain below the long-term 15-year historical average, Price said.

This will keep the industrial market on healthy ground, however, “the projected increase is something which won’t last too long as we expect vacancy rates to start to recompress in 2025,” according to Price, and “the climbing vacancy rates will also lead to more modest and sustainable rent growth in 2024 and beyond.”

Given the hot streak in 2020 and 2021, thinking long-term, context matters. From 1995 to 2019, the U.S. industrial vacancy rate averaged 8%. That recent industrial boom brought vacancy down to 2.8% in Q2 2022, which is more than twice as tight as the market had ever been. Ever since, vacancy has moved higher, rising to 4.7% as of Q3 2023. The report baseline has vacancy peaking in early 2025 at 6.2%, which would still be roughly 200 bps lower than the historical average.

Source: *=(C&W Cushman & Wakefield)