Industrial vacancy is likely nearing its peak for the current cycle, according to the latest research from Cushman & Wakefield. The report found overall national industrial vacancy climbed 20 basis points to 6.7%, which remains 30 bps below the 10-year pre-pandemic average.
During the fourth quarter, industrial absorption was positive in 60% of the 84 markets Cushman & Wakefield tracks. Eight markets reported more than five million square feet of absorption for the year.
Overall, the industrial market absorbed 36.8 million square feet during the fourth quarter, up from 33.3 million square feet during the third quarter but down 20% year-over-year. For the year, 135 million square feet of industrial product was absorbed, the report said.
Quarterly new leasing activity remained sluggish at approximately 130 million square feet for the fourth quarter, down 15.7% from the same period last year. Cushman & Wakefield said 591.3 million square feet of industrial deals were transacted in 2024, down 4.8% from 2023. On a positive note, 2024 was the sixth strongest year on record for new deal activity, according to the report. The Inland Empire and Dallas/Fort Worth showed particularly strong leasing activity for the year, each exceeding the 45-million-square-foot mark for the year.
“We’ve witnessed an uptick among firms looking to lease larger buildings to support their omnichannel fulfillment strategies and maintain inventory for their e-commerce, wholesale, and retail stock. This trend is not just about space, but about efficiency and customer satisfaction,” said Jason Tolliver, president, logistics & industrial services at Cushman & Wakefield. “Meanwhile, we’re also seeing a flurry of activity to support forward-deployed stock models, a strategy that keeps products closer to the market they serve and where customers order them, promising quicker deliveries and happier customers.”
New construction deliveries continued to decelerate for the second consecutive quarter with just 85.3 million square feet of new industrial product completed in the fourth quarter. That was down 8% quarter-over-quarter and 48% for the year. Of the product coming to market, 65% was speculative and much of that was delivered vacant, according to the report.
Of the total 425.5 million square feet of industrial facilities completed for the year, 22% were build-to-suit projects and 78% were speculative, compared with 17% BTS and 83% speculative the year prior.
Annual deliveries are expected to continue to fall in 2025, said the report. Much of the new industrial product is concentrated in the Southern and Western markets, accounting for 50% and 29% of the 2024 annual total, respectively.
Asking rents increased by 1% to $10.13 per square foot for the quarter, or 4.5% for the year. Rent growth was led by the South region and Northeast, while rents continued to soften in the West.
“After a year of hesitancy, logistics is entering a new, sustained growth phase,” said Tolliver. “Corporate capital is being deployed to optimize supply chains, diversify networks, and minimize potential risks. What’s particularly encouraging is the proactive approach of retailers, wholesalers, and 3PLs, who are not just reacting to the market, but shaping it. 2025 will be a year characterized by this bias for action.”