Industrial vacancy is beginning to plateau as new construction slowed to its lowest level since early 2021, according to Colliers’ third-quarter industrial report and outlook. Seventy-six million square feet of industrial construction was completed during the quarter, the lowest since the first three months of 2021, and quarterly construction completions are expected to continue to fall over the next few quarters.

The industrial pipeline peaked at 711 million square feet during the fourth quarter of 2022, according to Colliers. Total space under construction has since dropped 53% to 331 million square feet and is expected to fall even lower during the next six months.

Vacancy increased by only 19 basis points to 6.6% during the quarter, the smallest quarterly spike since it began to rise in late 2022 and was highest in markets with the most new supply over the past several quarters. The category increased the most in the West region – 256 basis points – and the least in the Midwest – 57 basis points. Vacancy is expected to peak around 6.8% during the first half of 2025 and then gradually decrease as new supply and tenant demand return to balance.