Industrial National Report

Competition for industrial space is strongest across CRE spectrum. At 4.0 percent, the vacancy rate in the U.S. industrial sector was at least 30 basis points below every other major commercial real estate segment in March. The pandemic’s jolt to online consumer spending, as well as the shipping backlogs that occurred thereafter, structurally altered many businesses' risk management planning and led them to buttress industrial footprints. A resilient labor market is also propping up wages, buoying retail sales, and fueling needs for warehousing capacity and distribution resources. Companies are slated to absorb a net of 330 million square feet of industrial space this year to support their operations, a volume 52 percent higher than the long-term mean. Expansions by large industrial users will aid demand for business-to-business services, also driving leasing activity for available space near these companies' new operations. This overall dynamic will keep national vacancy well-below any reading prior to 2021, despite a second consecutive year of record-level construction in 2023.