TAG Industrial Watch: May 31, 2025
In the midst of record-low vacancy rates three years ago, the general consensus was that industrial real estate would remain in short supply for years to come. However, it was at that point in Q3 2022 that the historic boom in industrial supply would begin to outpace weakening demand, a trend that has continued for now 12 consecutive quarters. Today, the general consensus is that industrial vacancy rates (which are at an 11-year high of 7.3%) have peaked as the construction pipeline returns to the lowest level since 2019. Once again, the general consensus is ignoring the warning signs showing up in the data. While the construction pipeline has slowed down, industrial demand has decelerated faster. With one more month to go in Q2, industrial demand is down by more than -11 million square feet. If net absorption finishes the quarter in the red, it will represent the first quarter of negative contraction since Q1 2010, when the economy was still lingering from the Great Recession.
The decline in demand has also weighed on annual rent growth, which is on pace to contract this year for the first time since Q3 2011 (currently sitting at 2.1%). Given that property values fundamentally follow availability and rent growth, the industrial market’s environment highlights the importance of investing in specialized assets that carry above-market rent escalations, especially in submarkets that still offer low vacancy rates. For example, the often-overlooked Saint Louis industrial market features a 3.9% vacancy rate and is anchored by manufacturing facilities that allow landlords to maintain higher levels of rent growth. For industrial investors seeking short-term protection but long-term gain, there are still plenty of good opportunities in the marketplace, if you know where and what to look for.
I N D U S T R I A L N E W S
Industrial Vacancy Nears Peak As Construction Pipeline Shrinks
GlobeSt.com – May 12, 2025
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Meet The Company That’s Solving It
Bisnow – May 19, 2025
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Manufacturing Jobs, Wells Fargo Analysis Says
CNBC – May 22, 2025
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China Wants Banks To Up Yuan Use In Cross-Border Transactions
PYMNTS – May 26, 2025
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The Next Segment Of Industrial Real Estate To Invest In
Mergers & Acquisitions – May 29, 2025
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R E G I O N A L N E W S
CRE Economist, Industry Leader
KC Conway Passes Away, Age 62
Connect CRE – May 16, 2025
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Arden Logistics Parks reinvests In North
Houston’s North Park 34 Industrial Park
REjournals – May 27, 2025
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Marcus & Millichap Capital Corp. Arranges $6.5M
Refinancing For Industrial Park In Fort Mill, South Carolina
REBusiness – May 14, 2025
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JPMREIT Acquires 15 Industrial Properties For $124M
Bisnow – May 23, 2025
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World’s Largest Food Service Distributor Branches Out
From Industrial Roots With First Retail Stores In Houston
CoStar – May 15, 2025
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