After unprecedented, accelerated growth in 2021 and 2022, industrial and logistics operators have taken their foot off the gas when it comes to new development and has even hit the brakes – at least this year – according to a new report from Colliers.
New supply tallies have set all-time highs of 450 million square feet through the first three quarters of 2023, up 33% year-over-year, it said,
Colliers also noted that demand for industrial product during the past 36 months “may never be repeated in our lifetimes.”
However, headwinds such as rising interest rates, vacancy concerns, and normalizing demand led to a big drop off in starts this year, which Colliers said is a good thing.
The top 25 markets Colliers tracks have witnessed an increase of 125 basis points over the past year. Vacancies have risen 176 basis points in the other 52 markets it follows.
“The pullback on speculative development will help ease vacancy concerns and return the market to a supply-demand equilibrium,” according to the report.
It’s the first time the pipeline has contracted since mid-2020 with industrial space under construction down by 26% on average year-over-year in the 25 largest markets.
And while circumstances have pushed vacancy rates higher in nearly all markets, Colliers said the outlook for industrial remains favorable as e-commerce and reshoring continue to grow.
Colliers expects balance to return to most markets by the end of 2024, resulting in stabilizing vacancy rates and steady demand.
Source: “Industrial’s Supply-Demand Should Balance by End of 2024“
