Cat & Mouse Market
The warehousing market has been through some turbulence over the past years.
First, the pandemic created a surge in e-commerce sales, and the demand for warehouse space soared as companies built up inventory. Then, rising interest rates and uncertainty about the outlook on the U.S. and global economies caused companies to scale back expansion plans, leaving some warehouses abandoned.
Warehouse vacancies recently exceeded 5% for the first time since 2020, according to a new report by commercial real estate services firm Cushman & Wakefield (CWK).
The slowdown in leasing activity could signal the beginning of an oversupply of industrial space, especially considering 156 million new square feet of space became available at the end of 2023. With persistent questions about consumer demand heading into 2024, the performance of ecommerce could be key to the warehouse market this year.
On the bright side, warehouse availability still remains well below the 15-year average vacancy rate of 6.4%. And demand remains strong in industrial hubs, such as Houston, eastern Pennsylvania, and Southern California.
Moreover, rents are still rising in the warehouse space. In the fourth quarter, the average rate per square foot increased 10% year-over-year. But if demand comes off, so could rent growth.
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