United States Industrial Outlook | Q2 2023
Industrial markets softening amidst declining figures
In the midst of rising inflation and economic uncertainties, industrial markets across the country posted sluggish figures compared to one year ago. While asking rates closed Q2 at $9.48 per s.f., up 18.4% year-over-year, the rate of growth is expected to start slowing significantly. Absorption figures tumbled 41.3% year-over-year as only 61.9 million s.f. was absorbed, bringing the year-to-date net absorption to 121.1 million s.f. With record amounts of new product delivering to the market and lagging pre-leasing rates in recent quarters, the vacancy rate continued to inch upward to 4.2%.
Market performance categories
Leasing: Preliminary leasing figures show that 112.6 million of leases were executed in Q2 which is a staggering 46.9% year-over-year decline. Despite leasing volume currently being lower than what was witnessed during the height of the pandemic, these quarterly figures are more in-line with pre-pandemic levels. Nearly half of all leases signed in Q2 were new leases indicating healthy demand for newer industrial product.
Rental Rates: Asking rates closed Q2 at $9.48 per s.f., up 18.4% year-over-year, however, the rate of growth is expected to start slowing significantly.
Net Absorption: Absorption figures tumbled 41.3% year-over-year as only 61.9 million s.f. was absorbed. As anticipated, absorption remains positive largely due to the delivery of pre-leased assets.
Vacancy: The vacancy rate continued to inch upward to 4.2% and with a wave of deliveries slated for Q3, the vacancy rate will continue to expand.
Under Construction: The pace of new ground breakings has decelerated 41.3% year-over-year as only 87.9 million s.f. of new projects broke ground in Q2, bringing the total number of projects under construction to 592.9 million s.f.