The U.S. economy avoided recession in 2024, and demand for industrial real estate remained strong in many areas. New space continues to be built at well over historic levels. However, warehousing and logistic spaces are outpacing flex and specialized manufacturing buildings at a rate of 2.6 to 1. E-commerce continues to grow, and many well-known retailers are exiting millions of square feet of distribution centers, which is adding more inventory back to the market. These factors are pushing overall vacancy to the highest point in 10 quarters and putting downward pressure on rates in that sector.
Smaller flex and specialized manufacturing spaces are a different story. For users of small bay, less than 50,000 square feet, the market is scarce. Vacancy is sitting between 3% and 4%. Vacancy is only slightly better for spaces with less than 100,000 square feet. These users are likely putting the largest upward pressure on the lease rate averages.
Our outlook in 2025 is that larger users of logistics space should see a greater opportunity for savings while smaller manufacturers will face more challenges. But as always, get as far ahead of your real estate needs as possible so you can find the best outcomes.
National industrial real estate trends
- Net absorption remained positive but was notably weaker than the previous two quarters, registering as the lowest fourth-quarter tally in more than 10 years.
- Annualized rent growth is projected to dip below 2.0% for the first time since 2012.
- To secure large leases, property owners are increasingly offering concessions. Over the past 12 months, free rent accounted for 2.6% of all leases signed, marking a 1% increase from the previous year.
- Industrial sales reached nearly $60 billion through mid-December, already matching the total value exchanged last year.
- Economic activity and job growth are projected to slow into 2025 as the full impact of higher interest rates flows through the economy.
If you’d like to learn more about the nation’s industrial real estate outlook, download the full report below. This report will give you full insight into the topics mentioned above along with a variety of other statistics to help you stay ahead of market trends.
Information contained in this report is provided, in part, from third-party sources, including the U.S. Bureau of Labor Statistics, the Bureau of Economic Analysis, Engineering News-Record, and CoStar Group. Even though obtained from sources deemed reliable, no warranty or representation, expressed or implied, is made as to the accuracy of the information herein.
