In 2022, the U.S. industrial rental market experienced a slowing of growth, with quarterly gains decreasing from 3% a year ago to 2% in 2022 (Q4). The outlook for 2023 is unlikely to see a reacceleration due to a record number of speculative commercial real estate developments set to complete, alongside the macroeconomic impacts of interest rate increases seen in 2022.

However, despite this slowdown, industrial vacancy rates remain close to all-time lows, and while rent growth may normalize, it is expected to rise modestly in 2023.

Consumer goods sales are still thriving and surpassing pre-pandemic growth trends, while U.S. seaports are welcoming record numbers of containerized imports and trucking tonnage remains near all-time highs. These factors led to a 50% increase in industrial leasing during the three months ending in November 2022, compared to the same period in 2019.

The positive momentum in the market is expected to continue, especially as declining gasoline prices free up household budgets and middle- and upper-income households hold substantial savings from the pandemic.

In late 2022, developers’ concerns about rising interest rates led to a decrease in construction starts on new industrial projects. As a result, the number of new projects completing construction each quarter is expected to decrease by spring 2024. This could pave the way for a reacceleration of rent growth in 2024-25, particularly if the global economy emerges from its current slowdown. We are also tracking more than 18 electric vehicle, battery, and semiconductor plants set to open across the U.S. during 2024-25, with suppliers to these facilities likely generating millions of square feet of additional leasing over that period.

Data courtesy of Bisnow, CoStar, Bloomberg, US Census Bureau and CXRE.