Cushman & Wakefield: U.S. Industrial Quarterly Net Absorption Up 10.5% While Vacancy Inches Higher by 20 bps

Rhea-AI Summary

Cushman & Wakefield (NYSE:CWK) reports that U.S. industrial vacancy rates increased by 20 basis points to 6.7% in Q4, while quarterly net absorption rose 10.5% to 36.8 msf from Q3's 33.3 msf. However, this represents a 20% year-over-year decline.

Key highlights include:

• New leasing activity reached 130 msf in Q4, down 15.7% year-over-year
• Projects under construction decreased 36% to 290.5 msf
• New construction deliveries fell 48% year-over-year to 85.3 msf in Q4
• Asking rents increased 1% quarterly to $10.13 psf, with a 4.5% annual growth

The Inland Empire and Dallas/Fort Worth markets exceeded 45 msf in new leasing activity for 2024. The South and West regions dominated completions, accounting for 50% and 29% of the 2024 annual total, respectively.

Positive

• Net absorption increased 10.5% quarter-over-quarter to 36.8 msf
• Asking rents grew 4.5% annually, reaching $10.13 psf
• 2024 ranked as the sixth strongest year for new deal activity
• One-third of under-construction projects are build-to-suit, potentially helping stabilize vacancy

Negative

• Vacancy rate increased 20 basis points to 6.7%
• Net absorption declined 20% year-over-year
• New leasing activity down 15.7% year-over-year
• Projects under construction dropped 36% annually
• 25 markets saw asking rents fall year-over-year

Insights

Real Estate Market Analyst

The Q4 2023 industrial real estate metrics paint a complex picture of market dynamics. The 6.7% vacancy rate, while up 20 bps, remains healthier than pre-pandemic levels. The 36.8 msf quarterly absorption represents a solid 10.5% sequential improvement, though year-over-year comparisons show some softening.

Most telling is the 36% reduction in construction pipeline to 290.5 msf - the lowest since 2018. This substantial pullback in speculative development, combined with 33% build-to-suit ratio, suggests a self-correcting market mechanism that should help stabilize vacancies. The 4.5% annual rent growth to $10.13 psf, while positive, shows regional disparity with the South leading at 6% while Western markets experienced declines.

The divergence between markets is particularly noteworthy - 60% showing positive absorption while others struggle with tenant right-sizing indicates a 'flight to quality' trend rather than broad-based weakness. The Inland Empire and Dallas/Fort Worth maintaining 45+ msf of leasing activity demonstrates sustained demand in prime logistics hubs.

Supply Chain Strategist

The data reveals a strategic shift in industrial space utilization that extends beyond simple square footage metrics. The increased focus on larger facilities for omnichannel fulfillment represents a fundamental evolution in supply chain strategy. This trend, coupled with the emphasis on forward-deployed stock models, indicates companies are prioritizing customer experience through proximity and speed.

The 591.3 msf of new deals in 2024, while down 4.8% year-over-year, demonstrates sustained commitment to logistics infrastructure investment. The concentration of activity in key markets like the Inland Empire and Dallas/Fort Worth suggests companies are building resilient networks around established transportation hubs.

The pullback in speculative construction actually strengthens the market's long-term fundamentals. The shift toward more build-to-suit developments (increasing from 17% to 22%) indicates more strategic, demand-driven expansion rather than speculative oversupply.

Projects under construction drop by 36% to 291 msf amid elevated vacancies and modest demand totals

CHICAGO--(BUSINESS WIRE)-- The overall national industrial vacancy rate edged higher in the fourth quarter, climbing 20 basis points (bps) to 6.7%, according to the latest research by Cushman & Wakefield (NYSE:CWK). This remains 30 basis points (bps) below the 10-year, pre-pandemic average.

“Industrial vacancy is likely nearing its peak for this cooling cycle in the coming quarters,” said Jason Price, Senior Director, Americas Head of Logistics & Industrial Research. “In Q4 we saw positive annual absorption in 60% of the 84 markets we track, and eight markets reported more than 5 million square feet (msf) of absorption for the year.”

Overall net absorption in the fourth quarter measured 36.8 msf up from the 33.3 msf recorded in Q3 but down 20% on a year-over-year basis. Approximately 135 msf of industrial product was absorbed in 2024 by year-end as some markets struggled with occupier consolidations and right-sizing throughout the year.

Quarterly new leasing activity remained slow at approximately 130 msf in the fourth quarter and was down 15.7% compared to one year ago. Since the start of the year, 591.3 msf of deals were transacted, down 4.8% year-over-year. However, 2024 ranked as the sixth strongest year on record for new deal activity. There were seven markets which surpassed 20 msf of new leasing activity for 2024 with the Inland Empire (46 msf) and Dallas/Fort Worth (45.5 msf) exceeding the 45-msf mark for the year.

“We've witnessed an uptick among firms looking to lease larger buildings to support their omnichannel fulfillment strategies and maintain inventory for their e-commerce, wholesale, and retail stock. This trend is not just about space, but about efficiency and customer satisfaction,” said Jason Tolliver, President, Logistics & Industrial Services. “Meanwhile, we're also seeing a flurry of activity to support forward-deployed stock models, a strategy that keeps products closer to the market they serve and where customers order them, promising quicker deliveries and happier customers.”

New construction deliveries continued to decelerate for the second straight quarter. Just 85.3 msf of new industrial product was completed in Q4, down 8% quarter-over-quarter and 48% versus one year ago. Over 65% of the total was speculative product, much of which was delivered vacant. For the year, 425.5 msf of industrial facilities were completed, with 22% (92.6 msf) build-to-suit (BTS) and 78% (333 msf) speculative; compared to 17% BTS and 83% speculative in 2023. The total was 31% lower than the previous year, with annual delivery totals expected to continue to fall in 2025. Completions continued to be concentrated in the South and West regions, accounting for 50% and 29% of the 2024 annual total, respectively. Only four markets saw more than 20 msf of completions year-to-date, compared to 10 markets in 2023. Meanwhile, as construction starts remained tempered overall, the under-development pipeline has continued to thin out, dropping by 36% annually to its lowest level (290.5 msf) since Q3 2018. One-third of that total is BTS developments, which will likely help stabilize vacancy in the second half of this year and beyond.

Asking rents ticked higher by another 1% quarterly during Q4 to $10.13 psf. For the year, asking rents climbed by 4.5%, fueled by the South region (6%) and Northeast (3.8%). Conversely, markets in the West region saw rents continue to soften over the last year, dropping by 2.3% on average. On the market level, 25 markets saw asking rents fall year-over-year, including five that reported double-digit decreases; led by Raleigh/Durham (-14%), Inland Empire (-14%), and Los Angeles (-13%). Still, 69% of the markets yielded annual asking rent increases, 21 of which saw rents climb by 5% or more, many of which were concentrated in the South region.

“After a year of hesitancy, logistics is entering a new, sustained growth phase. Corporate capital is being deployed to optimize supply chains, diversify networks, and minimize potential risks. What's particularly encouraging is the proactive approach of retailers, wholesalers, and 3PLs, who are not just reacting to the market, but shaping it. 2025 will be a year characterized by this bias for action,” said Tolliver.

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in nearly 400 offices and 60 countries. In 2023, the firm reported revenue of $9.5 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), sustainability and more. For additional information, visit www.cushmanwakefield.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250110802897/en/

Michael Boonshoft

Michael.boonshoft@cushwake.com

Source: Cushman & Wakefield

FAQ

What was CWK's reported industrial vacancy rate in Q4 2024?

Cushman & Wakefield reported that the industrial vacancy rate increased by 20 basis points to 6.7% in Q4 2024.

How much did industrial net absorption change in Q4 2024 for CWK?

Net absorption increased 10.5% quarter-over-quarter to 36.8 msf in Q4 2024, but was down 20% year-over-year.

What was the average asking rent per square foot reported by CWK in Q4 2024?

The average asking rent was $10.13 per square foot in Q4 2024, representing a 1% quarterly increase and 4.5% annual growth.

How much did CWK's industrial construction pipeline decrease in 2024?

The under-development pipeline dropped by 36% annually to 290.5 msf, reaching its lowest level since Q3 2018.

Which markets showed the largest asking rent decreases in CWK's Q4 2024 report?

Raleigh/Durham (-14%), Inland Empire (-14%), and Los Angeles (-13%) reported the largest asking rent decreases.