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Five years ago, when the pandemic pushed electronic commerce to new heights, the industrial warehouse space has become the largest commercial real estate game. It began to slow down in 2022, but now the economic uncertainty caused by constantly evolving tariff policy and persistent inflation made a greater number in the previously hot real estate sector.
According to 2010, 27 million square feet of industrial space were absorbed in the first half, and demand fell 11.3 million in the second quarter – the first quarterly decline since 2010 – according to a August Naiop report, a commercial real estate development association.
Since uncertainty should continue until the end of this year, Naiop plans that clear absorption will be “almost flat” during the second half of this year.
“The request for industrial space should recover some shortly after the occupants have time to adapt to a new pricing regime,” wrote the authors of the report. “However, higher prices and the slowdown in employment growth will likely lead to slower demand than that known from 2020 to 2022 or in the six years preceding the pandemic.”
Naiop predicts the absorption to rebound from the second quarter of 2026, with total annual absorption totaling 119.3 million square feet. It awaits 109.7 million additional square feet of absorption in the first half of 2027.
As for sales of industrial properties of this year, they are almost equal to the pace of last year, according to a separate report from Yardi. Industrial sales totaled $ 74.3 billion in 2024, which increased by 14.7% compared to 2023, but down to the summit of $ 129.8 billion in 2021, according to the report.
Price appreciation was also cooled after huge gains between 2019 and 2022, when the average sale price of industrial property jumped 54%.
“The capital was inexpensive and investors wanted to benefit from record growth in rents resulting from historically low industrial vacuums in addition to supply of supply,” noted the report.
So far this year, the average sale price for industrial transactions completed was only 6% higher than the average of 2022, according to the Yardi report.
The national industrial vacancy rate in July was 9.1%, up 10 base points compared to June and up 270 basic points from July 2024. Loyers on site, however, increased by 6.1% from one year to the next.
“We have seen the industrial investment market go from Darling to Resilient in recent years, but we are planning the activity and the interest of reinstating itself pending economic clarity coupled with an increasing demand for space,” said Peter Kolaczynski, director of research on Yardi, in a press release.