Vacancy Rate: The U.S. average vacancy rate increased by 19 basis points to 6.61%, marking the smallest quarterly increase since late 2022.
New Supply: New industrial construction completions totaled 76 million SF, the lowest since early 2021, and 54% below the level of the third quarter in 2023.
Net Absorption: Net absorption reached 38.7 million SF, bringing the year-to-date total to 115 million SF.
Construction Pipeline: The U.S. industrial construction pipeline stood at 331.5 million SF, a 53% decrease from its peak in Q4 2022, and is expected to fall below 300 million SF by early 2025.
Key Trends
Demand and Supply Balance: As new supply decreases, the market is expected to approach equilibrium, with vacancy rates likely to peak at 6.8% in the first half of 2025 before gradually decreasing.
Leasing Activity: New leasing activity is expected to increase in the fourth quarter of 2024 and into early 2025, driven by a shift in occupiers from 3PL providers to manufacturing, data centers, food and beverage, and general retail users.
Rent Growth: Average weighted rents rose to $11.08/SF, a 9% increase year-over-year, with warehouse/distribution rents increasing by 8% to $10.26/SF. However, some markets have seen rent declines due to overgrowth in previous years.
Market Indicators
Metric
24Q3
24Q2
23Q3
Vacancy Rate
6.61%
6.42%
5.03%
Net Absorption (SF)
38,748,444
42,923,412
46,238,934
YTD Net Absorption (SF)
114,490,935
70,833,080
180,101,536
New Supply (SF)
75,615,956
122,768,623
163,373,522
YTD New Supply (SF)
319,008,285
243,317,686
452,905,865
Under Construction (SF)
331,450,638
342,953,939
579,605,835
Overall Asking Lease Rate (PSF Net)
$11.08
$11.07
$10.19
Top Markets by Net Absorption
Rank
Market
Net Absorption (SF)
1
Houston
5,748,031
2
Dallas-Fort Worth
5,566,957
3
Philadelphia
3,534,796
4
New York City Metro
3,168,988
5
Denver
2,429,562
Top Markets by Under Construction
Rank
Market
Under Construction (SF)
1
Phoenix
26,235,396
2
Greater Los Angeles
19,574,059
3
Atlanta
19,266,014
4
Dallas-Fort Worth
19,079,541
5
Austin
17,197,483
Fastest Growing Markets by Under Construction as % of Inventory
Rank
Market
% of Inventory
1
Austin
18.7%
2
New Hampshire Markets
9.1%
3
Boise
8.5%
4
Savannah
7.7%
5
Norfolk
7.3%
Regional Overview
Region
24Q3 Vacancy Rate
YOY Vacancy Rate Change (bps)
24Q3 Net Absorption (SF)
2024 YTD Net Absorption (SF)
24Q3 New Supply (SF)
2024 YTD New Supply (SF)
24Q3 Under Construction (SF)
West
6.56%
+256
3,738,457
8,936,509
22,947,047
93,736,958
96,315,846
Midwest
5.32%
+57
6,674,919
34,192,566
11,800,107
45,261,342
54,328,196
South
7.82%
+179
19,096,912
59,332,383
29,504,409
151,127,918
140,638,061
Northeast
6.46%
+121
9,238,156
12,029,477
11,364,393
28,882,067
40,168,535
U.S. Total
6.61%
+158
38,748,444
114,490,935
75,615,956
319,008,285
331,450,638
Economic Outlook
GDP Growth: The U.S. economy grew by 2.8% in Q3 2024, approaching the election.
Interest Rates: The Federal Reserve cut interest rates by 50 basis points in September, marking the first cut since the early days of the pandemic.
Economic Uncertainty: Tariffs, net migration changes, and new policies remain uncertain, but a slight economic slowdown is expected.
Market Response: The industrial market is expected to respond positively after the election and with the establishment of a new administration.
Vacancy Rate Forecast
The U.S. vacancy rate is forecast to peak at 6.8% in the first half of 2025 and then gradually decline as supply and demand balance.
Summary of Key Points
The industrial market is showing signs of stabilization with a slower increase in vacancy rates.
New supply is decreasing significantly, leading to a potential balance between supply and demand in 2025.
Leasing activity is expected to rise in the fourth quarter and into early 2025, with a shift in occupier types.
Rent growth has normalized in most markets, though some have seen declines.
The U.S. industrial market is expected to respond positively to the economic and policy changes expected post-election.
