In the first quarter of 2025, the single-tenant industrial sector experienced mixed dynamics, while the multi-tenant market demonstrated a year-over-year increase, reinforcing its status as a favored asset class, according to Northmarq reports. The resilience observed in both sectors was driven by strong demand factors such as e-commerce growth, supply chain optimization, third-party logistics, last-mile distribution, and evolving inventory management strategies.
Single-tenant industrial sales volume in Q1 2025 rose by 2.3% compared to the same period in 2024. However, when viewed in a broader context, the sector had been gaining momentum throughout 2024, culminating in a strong finish to the year. Despite this, sales volume declined sharply by 47.4% from Q4 2024 to Q1 2025. This quarter-over-quarter decrease was evident across nearly all regions, including the Mid-Atlantic, Midwest, Northeast, Southeast, and West, with the Southwest being the only exception where sales slightly increased. Specifically, the Mid-Atlantic saw sales fall from $560.72 million in Q4 2024 to $325.16 million in Q1 2025, the Midwest dropped from $1.38 billion to $900.19 million, the Northeast decreased from $767.94 million to $249.70 million, the Southeast declined from $2,076.29 million to $1,103.45 million, the Southwest rose marginally from $983.08 million to $1.05 billion and the West fell from $2.93 billion to $949.65 million.
Average capitalization rates for single-tenant industrial properties increased modestly by six basis points year-over-year, moving from 6.50% to 6.56%, and rose 4 basis points quarter-over-quarter. Regionally, cap rates shifted as follows from Q4 2024 to Q1 2025: the Mid-Atlantic increased from 6.40% to 6.56%, the Midwest edged up from 7.14% to 7.16%, the Northeast slightly decreased from 5.92% to 5.83%, the Southeast rose from 6.66% to 6.69%, the Southwest climbed from 6.75% to 6.85%, and the West declined from 6.02% to 5.89%. Buyer composition during the quarter was predominantly domestic private investors at 51%, followed by domestic institutional buyers at 26%, domestic users at 13%, international buyers at 7%, and domestic public REITs at 4%.
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The multi-tenant industrial sector also experienced a significant quarter-over-quarter decline in investment sales volume, falling 32.1% to $16.17 billion. Nevertheless, this represented a 5.8% increase compared to Q1 2024. Similar to the broader commercial real estate market, financial conditions and elevated borrowing costs contributed to a dampening of deal activity. Quarter-over-quarter sales decreased across all regions without exception. The Mid-Atlantic region’s sales dropped from $1,487.34 million in Q4 2024 to $1,372.13 million in Q1 2025, the Midwest fell from $3,187.35 million to $2,179.78 million, the Northeast declined from $2,347.67 million to $1,688.27 million, the Southeast decreased sharply from $6,577.93 million to $2,664.61 million, the Southwest fell from $5,765.51 million to $3,146.93 million, and the West dropped from $4,457.13 million to $3,961.13 million.
Average cap rates for multi-tenant industrial properties rose 31 basis points year-over-year, from 6.50% to 6.81%, and increased by 1 basis point quarter-over-quarter. Regionally, cap rates changed from Q4 2024 to Q1 2025 as follows: the Mid-Atlantic decreased from 6.57% to 6.38%, the Midwest rose from 7.03% to 7.57%, the Northeast increased slightly from 5.77% to 5.88%, the Southeast climbed from 6.05% to 6.21%, the Southwest jumped from 5.69% to 6.21%, and the West edged up from 5.43% to 5.52%. Buyer profiles in the first quarter consisted of 51% domestic private investors, 23% domestic institutional buyers, 10% domestic users, 13% international buyers, and 3% domestic public REITs.
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