By Ashley Fahey – Editor, The National Observer: Real Estate Edition, The Business Journals
The nation's industrial market continued to slow in the third quarter, building on a two-year cooling-off period after its pandemic heyday, but the market could soon hit bottom.
Preliminary data found the U.S. industrial vacancy rate hit 7.4% in Q3, a 350-basis-point increase from two years ago. It's also the highest vacancy rate within the national industrial market in a decade.
The national industrial market has undergone the steepest uptick in vacancy in the shortest period of time ever. That's largely thanks to how hot the market had become — and how very quickly — during the Covid-19 pandemic, followed by a significant cooling-off period as consumer and industrial tenants' needs changed.
Sublease availability also grew substantially within industrial in Q3, reaching a record 198.7 million square feet. That's up 45% from the same time a year ago and continues to rise, albeit at a slower pace than what's been recorded in recent quarters. Sublease space grew 8.8% in Q3 compared to an average quarterly growth rate of 20.1% last year.
"The base of the change that we’ve experienced ... has been a big shock to the system
and has had a lot of implications in terms of rents and tenant-landlord dynamics. To characterize the current situation, we’re finding the bottom of this mini-cycle. I think we are approaching that plateauing of vacancy and sublease availability, but time will tell."
It's likely more industrial groups will move forward on real estate decisions following the November election, Russo said, once they've begun to figure out what the incoming White House administration's policy goals may be.
In response to the slowing market, new construction has also plummeted, with starts in Q3 hitting their lowest level since 2016.
Full story: https://tinyurl.com/bd3pejvh
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