Understanding Changes to the Industrial Development Timeline

Newmark’s Kyle Roberts, Executive Managing Director, Industrial/Capital Markets, and Lisa DeNight, National Industrial Research Director, recently appeared on Wealth Management Real Estate’s Common Area podcast to discuss some key trends impacting the industrial sphere today, and what the future has in store for the market overall.

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During the Wealth Management podcast episode, one of the most acute trends discussed was the observed delay in delivering much-needed space to the market over the past 12-18 months. Newmark’s Industrial & Logistics Research team wrote a report entitled “Backlog Blues” in June 2022 to quantify this trend. In 15 key markets across the country, delivery is taking, on average, 2.5 months longer for projects to go through entitlements than in 2019, and in addition, an average 2.5 months longer to construct buildings. As a result, the national industrial construction pipeline has swelled to all-time heights as more projects stay in the pipeline for longer. Occupiers in need of new space have navigated a challenging environment of muted deliveries and tightening vacancy in an era of unprecedented competition for space.  

With such persistent volatility in the supply chain and labor markets, and difficulty in obtaining space, many users have taken any space they can get. However, as consumer spending decelerates amid high inflation, how will space needs change, especially as many occupiers are now dealing with an excess of unwanted inventory?

As explained in the podcast, in environments of decelerating demand, companies often start to undertake “supply-chain optimization” efforts, focused on reduction of underutilized facilities in favor of consolidating to provide operational efficiencies.  This trend can accelerate vacancy in markets in which occupiers choose to reduce footprint, or buoy markets where occupiers choose to site consolidation facilities. Markets with attractive occupancy costs, available industrial supply and strong labor pools and logistics infrastructure may see a boost in demand, especially in the short term as excess inventory weighs on balance sheets and needs to be stored somewhere. This dynamic, and implications both nationally and locally, will be explored further in an upcoming Newmark Research report, “Taking Inventory.”

For more granular detail on the above trends, and more insights on macro conditions and pivoting occupier strategies, listen to the full conversation with Wealth Management here: