SPECIAL ADVERTISING SECTION
INDUSTRIAL REAL ESTATE
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In the first quarter of 2025, roughly 123 million square feet of industrial real estate was leased in the US.
to 7.3 % as supply exceeded demand, JLL noted. CBRE estimated vacancies rose 20 basis points to 6.3 %, describing this as the highest level since 2014 and noting that the first quarter was the 11th consecutive quarter in which completions eclipsed net absorption.
In East Coast markets, the average vacancy rate was 6.4 %, while the West Coast’ s was 6.3 %. Vacancy rates for the Midwest and the South were 6.8 % and 7.7 % respectively, CBRE estimated.
Dallas-Fort Worth( 4.0 million square feet) ranked No. 1 for net absorption during the first quarter. California’ s Inland Empire( 3.6 million square feet), Kansas City, Mo.( 3.1 million square feet), Columbus, Ohio( 2.5 million square feet) and Charlotte, NC( 2.3 million square feet) completed the top five.
“ Developers have been responsive to the decline in demand,” commercial real estate development association NAIOP wrote in a March report. NAIOP estimates the construction pipeline has shrunk to 493 million square feet from a peak of approximately 1 billion square feet in late 2022.
A May report by Cushman & Wakefield predicts vacancy rates should peak at 8 % in early 2026 before starting to decline.
“ In 2027, demand will be normalizing amid less supply, which will, in turn, firm up rent growth quickly heading toward the end of the decade,” the report stated.
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“ The window for occupiers to take advantage of concessions such as free rent periods and weaker competition will be short-lived under the baseline outlook.”
NAOIP is more cautious, warning that as long as deliveries exceed absorption, the average vacancy rate will rise. It estimates annual rent growth was just 2.8 % in 2024, down from 6.9 % in 2023 and the smallest yearly increase since 2012.
Price weakness has extended into 2025, with first-quarter average asking rents declining to $ 10.91 per square foot, down 0.3 % versus the previous three months and 2.6 % lower versus the prior-year period, CBRE estimated.
Tariff and trade impacts In 2023 and 2024, e-commercebased occupiers of industrial real estate paused the expansion of their premises as the pandemic-sparked boom in online shopping ebbed.
Now,“ signs are emerging that the rightsizing and pause are nearing an end,” Cushman & Wakefield wrote, forecasting e-commerce’ s share of core retail sales will rise to 30.6 % in 2027 from 29.9 % in 2024.
Such forecasts may not age well due to President Donald Trump’ s combative, unpredictable tariff and trade strategy, which has roiled markets worldwide from equities to fixed income, commodities and currencies.
Uncertainty has similarly stalked the US logistics sector, with little clarity over whether Trump’ s self-declared“ Liberation Day” tariffs on imports will lead to meaningful changes to consumer demand for foreign goods, especially those originating from China.
“ Consumer spending will be key to watch as tariffs impact confidence and spending power, but also as they change relative prices,” the Cushman & Wakefield report stated.“ For now, the outlook is cautiously optimistic that consumers will hold on and continue to spend on essentials and some discretionary items.”
West Coast ports and logistics facilities, as the primary destination for Chinese and East Asian exports to the US, would be most affected by higher US import tariffs.
“ Demand has softened, [ although ] we did get a short-term bump in demand when they were stockpiling,” Andrews said.“ Since‘ Liberation Day,’ occupiers are delaying those decisions and, in many cases, are dropping deals.
“ Uncertainty is what’ s keeping our tenants and our customers from moving forward, making any sort of long-term decisions— not only regarding leasing, but also on hiring staff, spending capital and making other long-term commitments.” A Cushman & Wakefield survey in late April identified similar trends. Half of occupiers were delaying leasing by 3 to 6 months due to the United States’ escalating trade war, while a further 13 % had postponed leasing of 6 to 12 months and 11 % had paused indefinitely. Only 26 % of occupiers said their plans were unchanged.
Larger third-party logistics providers( 3PLs) anticipated a probable intensification of the long-running trade war between the US and China and began diversifying their supply chains in early 2024 to source more from southeast Asian countries and less from China.
“ Many occupiers are taking a wait-andsee approach before making real-estate decisions,” CBRE wrote.“ The imposition of widespread tariffs on imports likely will have a significant impact on market activity, especially if increased costs are passed on to consumers.”
Due to tariff uncertainty, bonded warehouses are proving increasingly attractive to occupiers. Usually located near ports and airports, bonded warehouses can store imported goods for up to five years without being liable for tariffs or duties. As such, importers can delay incurring such costs until those goods are transported outside the bonded warehouse.
Data center investment
Rapid consumer and corporate adoption of artificial intelligence is increasing the investment in— and construction of— data centers to meet demand. This is impacting the industrial real estate sector, although data centers require such an abundance of power and space that many locations are not suitable. Therefore, sites that can house data centers have increased in price significantly.
Since the start of 2023, ground has been broken on more than 51 million square feet of data centers, according to CommercialEdge.
“ Data centers’ power requirements have led to site selection problems and community pushback,” CommercialEdge noted in a May 29 report.“ Generative AI is here to stay, and it will continue to fuel significant growth of data centers for the foreseeable future … however, it is not a
July 7, 2024 | Journal of Commerce 47