I&L Market Fundamentals Remain Strong in Q4

  • The U.S. industrial & logistics (I&L) market finished the year with continued positive net absorption, record-high asking rent and a significant amount of new development.
  • The overall vacancy rate remained unchanged from Q3 at 4.4%, with a marginal 20-basis-point increase year-over-year.
  • With a pickup in new construction, net absorption rose by 20.1% quarter-over-quarter to 55.7 million sq. ft. in Q4, the 39th consecutive quarter of positive absorption. For full-year 2019, however, absorption fell by 30.7% to 183.3 million sq. ft., largely due to tight conditions in several markets.
  • 224 million sq. ft. of industrial product was completed in 2019, 5.0% less than in 2018. Completions picked up in Q4 and will continue to increase in 2020 with 309 million sq. ft. currently underway.
  • Average net asking rent rose 0.4% quarter-over-quarter to $7.63 per sq. ft., the 33rd consecutive quarter of rent growth. Rents increased by a quarterly average of 5.1% year-over-year in 2019.
  • While demand from e-commerce and 3PL occupiers remains strong, the fastest growing industry is food & beverage—largely from grocery companies modernizing supply chains to support growing online sales. This trend is expected to continue in 2020.
  • Consumer sentiment remains strong and the unemployment rate is at a 50-year low of 3.5%—conditions that highly support the I&L sector. The fall in GDP growth to 2.3% in 2019 from 2.9% in 2018 has not dramatically impacted I&L market performance given strong retail spending and jobs growth.
  • Occupiers will continue to improve urban distribution to quickly serve as many customers as possible. Finding creative ways to serve large population centers in markets with record-low I&L vacancy rates will remain a top trend in 2020.