4Q24 U.S. Industrial Market Conditions and Trends

At the close of Q4 2024, the U.S. industrial market recorded its 60th consecutive quarter of positive net absorption, though demand softened compared to the previous two quarters. While market vacancy is likely to hover around a cyclical high of 6.9% in 2025, this easing of supply-side pressures sets the stage for future improvement.

Economic Conditions and Industrial Demand Drivers

• Economic indicators remain mixed and are reflected in fluctuating consumer sentiment. The U.S. presidential election delivered a decisive outcome; however, early trade policy decisions by the new administration have introduced significant uncertainty for businesses domestically and abroad.​​
• Home sales, which significantly influence the purchase of high-value goods and thus industrial demand, dropped to their lowest level in over a decade in 2024. Still, there are signs of a modest rebound. In November, U.S. pending home sales were higher than 2023 levels for the third consecutive month.​
• Manufacturing construction spending continues near record highs, reaching an inflation-adjusted $122 billion in November 2024—nearly double the pre-pandemic five-year average. The South captured the majority of this investment.

Leasing Market Fundamentals

• Demand softened in Q4, due to macro uncertainties, a persistent space overhang, and tenant move-outs stemming from credit loss. Yet, demand remained solidly positive, marking the 60th consecutive quarter of net positive absorption.​
• Overall market vacancy increased from 6.6% to 6.9% quarter over quarter, marking its highest point in a decade. However, vacancy rates are expected to stabilize around current levels this year, with no significant changes anticipated until 2026.​
• Asking rents recorded their first annualized decline since 2012, though the -0.1% decrease reflects near-stability compared to last year. Contract rates have held relatively steady over the past year, while concessions continue to increase

Capital Markets

• Q4 sales volume rose to $30 billion, a strong increase compared to the previous year. This growth effectively ended the trend of annualized declines that lasted for over two years, despite relatively flat volumes compared to 2023.​
• Over the past 12 months, industrial transaction cap rates have fluctuated around the low-to mid-5% range, which will likely reoccur in 2025. Spreads to the 10-year Treasury remain significantly below their long-term averages.​
• Across the ecosystem of investor profiles, private capital continues to represent nearly half of total acquisitions. Notably, users accounted for 10% of purchases this year, marking their highest share in nearly a decade.