U.S. industrial market conditions are as strong as ever, with record-high asking rents, a robust development pipeline and limited availability amid fierce demand from a diversified occupier base.
Companies are leasing space at record levels to handle the large increase in e-commerce sales in the first half of 2021. Net absorption of 84.8 million sq. ft. in Q2 brought the year-to-date total to 153.8 million sq. ft.—the highest midyear level since 2016.
Despite strong demand, construction completions dropped to 51.7 million sq. ft. in Q2, the lowest quarterly total since Q1 2018. Completions have been hampered by elevated construction costs and long lead times for sourcing materials. Nevertheless, a record 410 million sq. ft. is currently under construction.
Positive fundamentals and a drop in completions lowered the overall vacancy rate by 20 basis points (bps) to 4.0% in Q2, the lowest level since Q4 2019.
Asking rents increased by 2.9% quarter-over-quarter and 9.8% year-over-year to a record $8.66 per sq. ft. Rent growth is expected to hit double-digits by year-end.