National industrial vacancy is expected to stabilize in the coming months as new supply tapers off after more than doubling over the past few years, according to a report from CommercialEdge. That comes after the category increased 30 basis points month-over-month to 8.8% in April.
As rates have risen, the average premium paid for a new lease has decreased and pushed the national spread between a lease signed in the past 12 months and the overall in-place average rent to $1.80 per square foot. That compares with a spread of $2.35 per square foot logged in April 2024. Boston and Bridgeport posted some of the nation’s widest lease spreads in April, at $4.70 and $5.90 per square foot.
In-place rents averaged $8.49 per square foot, a year-over-year increase of 6.7%. Midwestern markets showed the slowest yearly rent growth, with Kansas City at 3.8%, Detroit at 3.9%, Indianapolis at 4%, Cincinnati at 4.3% and Chicago at 4.4%. Memphis had the slowest rent growth of the top 25 markets at 3.7%. CommercialEdge said the primary reason for this was that ample space for new development in these markets allowed fast delivery of new supply, keeping vacancy rates higher than in port markets.
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Rents grew the most in New Jersey, Nashville and Miami, according to the report.
Across the country, 352.9 million square feet of industrial space, or 1.7% of stock, were under construction as of April. New development is slowing across most markets, but Dallas-Fort Worth is one of a handful of markets that currently has more space under construction than it did at the same time last year. The rapid industrial expansion has been driven by a population boom in Texas and the nearshoring of manufacturing to Mexico, said CommercialEdge.
The report noted e-commerce sales for the first three months of the year were flat with the fourth quarter, marking the worst quarterly growth for online sales since the third quarter of 2021. On a year-over-year basis, e-commerce sales volume increased 6.1% during the quarter, which is the third-lowest mark of the past 15 years. CommercialEdge said the numbers were “unexpected and unwelcome for the industrial sector,” but emphasized that long-term e-commerce drivers remain strong.
Meanwhile, the data center market may face challenges as it moves into the future, despite a surge in investments in artificial intelligence and a construction boom, said the report. Since the beginning of 2023, 51 million square feet of new data center space has broken ground, but that may be slowing as evidenced by reports that two tech giants – AWS and Microsoft – are slowing data center leasing, said the report. Both firms have said this is a temporary move, but analysts are carefully watching the sector as headwinds develop, including Chinese startup DeepSeek unveiling a cheaper and less resource-intensive AI model than Western companies have developed.
“Much like the rush to build distribution to support the e-commerce boom that COVID accelerated, the rightsizing mentality that soon followed is already on the minds of data center users and developers,” said CommercialEdge director Peter Kolaczynski. “We expect more caution in the near future, as companies determine what the right footprint should be."
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
