LOS ANGELES—Even as the pace of construction shows no immediate signs of abating, the availability rate for industrial nationwide will fall to 10% this year, CBRE says. A category with especially strong potential is smaller facilities, which have taken a back seat to larger distribution centers in the current cycle.

“There is still plenty of upside for the industrial market, particularly for rental growth,” says Scott Marshall, Americas executive managing director for industrial services at CBRE. “Both cyclical demand drivers—GDP growth, expanding manufacturing sector—and structural demand drivers—e-commerce, supply chain evolution—will promote strong user demand across geographies and product types.”

Rents generally aren't expected to return to pre-recession levels until the second half of 2016, CBRE says. Of the 60 markets CBRE Econometric Advisors tracks nationally, only nine have seen rents bounce back to their previous peaks. That's the case even as net absorption well above the long-term average of 133 million square feet is expected to spur rent increases of 4% to 5% this year.

New construction is expected to rise to 141.8 million square feet nationwide in 2015, compared to 115.2 million square feet last year. The long-term average is 155.4 million square feet in a year, and CBRE cites the possibility of rising construction costs putting a drag on new development. Even so, the firm predicts a 20-million-square-foot shortfall of new supply keeping up with demand.

Construction has also been highly concentrated, with just 10 markets accounting for 62% of all new industrial space last year. Far and away the largest was the Inland Empire, although Chicago, Dallas and Houston also figure prominently. Other markets that saw substantial amounts of development in '14 were Phoenix; Indianapolis; Columbus, OH; Kansas City, MO/KS; Fort Worth; and Atlanta.

CBRE says light industrial facilities of 200,0000 square feet or less may be the best for growth this year. Historically, they've outperformed their larger counterparts in rent growth, averaging $6.51 per square foot in the third quarter of last year compared to $4.38 per square foot in larger facilities.

Thus far in the recovery, though, they've been under-represented in development, accounting for just 17% of new builds while comprising more than two-thirds of the total stock. However, demand is on the upswing for space at smaller infill locations in land- and supply-constrained urban areas.

The mushrooming popularity of e-commerce as a driver for industrial space is a familiar story by now, but CBRE says an increase in domestic manufacturing is also boosting demand in key markets. In fact, production outputs are now at all-time highs—but that doesn't mean a concomitant boost in manufacturing employment, nor is this due to the so-called reshoring phenomenon, which the report questions.

“According to the MIT Center for Transportation and Logistics, over the past five years, more than 50 US-based companies, including GE, Apple, Whirlpool and CAT, reportedly reshored some of their manufacturing capabilities from the Far East,” the report states. “These moves have spurred optimism for a renaissance of domestic manufacturing.” Yet, according to the report, thus far it has been more talk than action, as most of these companies have yet to relocate any operations from overseas, “and the announced plans only include domesticating a small portion of their overall manufacturing capabilities.” Instead, CBRE credits increasing automation and advances in technology with the rise in output.