New Industrial Supply Finally Outpaces Demand

Photo by Shutterstock

Last year new supply in the industrial market finally surpassed demand and is expected to continue to do so for the next two years, according to a report from Cushman & Wakefield. However, industrial will remain a hotly-contested asset class by investors with North American absorption forecasted to be a healthy 459.9 million square feet through 2021 and a vacancy that will remain anchored around the 5% mark, C&W says. Meanwhile, asking rents are expected to increase by 6.8% and reach a new nominal high of $6.95 per square foot by year-end 2021—up from $6.51 psf in 2019.

In addition, it adds that “Over the next several years, we expect underlying industrial market liquidity to continue to grow as investors seek to deploy record levels of capital with an increasingly favorable allocation directed towards industrial assets.”

Industrial Cooled Off In 2019

There were several factors that led to the tipping point for industrial supply-demand last year, in which new supply registered 336.3 million square feet compared to 262.1 million square feet, respectively. Last year also saw a rough start with weather-related construction delays causing a ripple effect throughout the rest of the year, thus slowing tenant occupancy, C&W says. Also, a lack of quality vacant space continues to restrict net occupancy growth.