TAG Industrial Watch: October 8, 2022
For the first time in nearly two years, the supply of new industrial buildings outpaced demand during the third quarter of 2022. Despite net absorption slowing for the fourth consecutive quarter, Q3 demand among the top 50 metro areas stood 50% higher than the quarterly average over the last decade. Meanwhile, new deliveries hit a new quarterly record at 110 million square feet, surpassing demand by just over 17 million square feet. Nonetheless, there is still plenty of good news for industrial landlords, especially owners of smaller properties.
The surplus space represents a small drop in the industrial bucket, with the national vacancy rate maintaining its record low of 4.0%. With supply remaining tight, rents are expected to continue growing at historically high rates, albeit just at a slower pace. In addition, nearly 93% of all the new inventory is concentrated in warehouses larger than 100,000 square feet. Although economic headwinds continue to build, today’s market still offers a great opportunity for industrial landlords.
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