United States Industrial Outlook | Q1 2023
Industrial markets cooled as fundamentals decelerate
Absorption in the first quarter posted a 47.0% year-over-year decline as 58.6 million s.f. was absorbed. Deliveries in the first quarter amounted to 127.7 million s.f., and when coupled with sluggish pre-leasing figures, the vacancy rate increased 40 bps from the prior quarter to 3.8%. Furthermore, this was the first quarter that saw an uptick in sublease vacancy which rose to 0.5%.
Market performance categories
Leasing: Preliminary leasing data indicates that Q1 2023 volume has dropped 16.3% from the previous quarter. In Q1, 61.5% of industrial leases were new to market deals, indicating companies are strategically expanding or establishing operations in markets that benefit their goals. Furthermore, Class A assets accounted for 68.5% of leases signed indicating it continues to remain the most attractive and active asset subtype.
Rental Rates: As anticipated, the average asking rates rose 20.6% year-over-year to $9.19 p.s.f.
Net Absorption: Absorption in the first quarter posted a 47.0% year-over-year decline as 58.6 million s.f. was absorbed. The bulk of absorption was attributed to pre-leased assets delivering.
Vacancy: With sluggish pre-leasing figures and robust deliveries, the vacancy rate increased 40 bps from the prior quarter to 3.8%. However, many markets continue to maintain a sub 2.0% vacancy rate.
Under Construction: Number of groundbreakings backslid despite historic low vacancy rate. There is currently 620.5 million s.f. is under construction across the nation. 2023 will close with nearly 90% of all product currently under construction delivering which will increase the total industrial inventory across the country roughly 3.8%.