The U.S. industrial real estate market is experiencing unprecedented demand, with availability rates reaching their lowest point in decades according to recent data from CBRE. The commercial real estate services firm's latest report reveals an availability rate of just 7.0% in Q4 2022 - the lowest reading since CBRE began tracking this metric in 1988.
Market Dynamics Reveal Investment Potential
CBRE's Industrial Availability Index shows this marks the 34th consecutive quarter of declining availability, representing the longest sustained downward trend in the report's history. The metric measures both vacant spaces and currently occupied spaces actively marketing for new tenants, providing a comprehensive view of market conditions.
Regional variations show 38 markets experiencing availability declines, while 20 saw increases and 6 remained stable. The most significant demand continues to come from e-commerce growth and supply chain modernization efforts.
Supply-Demand Imbalance Continues
Net absorption outpaced new construction by approximately 6 million square feet in Q4 2022. While the gap narrowed from Q3's 9.3 million square feet difference, the annual total shows demand exceeded supply by 29 million square feet in 2022.
"Industrial fundamentals remain strong with demand continuing to outpace supply," noted CBRE's report. "The gap between demand and supply has widened over the past two quarters, indicating the sector remains in a late-cycle expansion phase."
Key Drivers of Market Conditions
Several structural factors contribute to the tight market conditions:
- E-commerce expansion: Online retail growth requires approximately three times more warehouse space than traditional brick-and-mortar operations
- Supply chain optimization: Companies seek facilities closer to population centers to reduce delivery times and costs
- Manufacturing reshoring: Increased domestic production creates demand for industrial facilities
- Land scarcity: Limited available land near major logistics hubs constrains new development
- Construction costs: Rising materials and labor expenses slow new project starts
Market Implications Across Sectors
The tight market conditions create both opportunities and challenges for different market participants:
- Property owners: Benefit from rising rents and low vacancies but must monitor market shifts
- Tenants: Face limited options and higher costs, requiring earlier planning and flexible solutions
- Developers: See strong demand but face land availability and cost challenges
Future Outlook
CBRE analysts project continued industrial real estate demand growth, though potentially at moderated levels. Emerging trends include:
- Last-mile delivery facilities becoming increasingly valuable
- Greater adoption of automation and smart warehouse technologies
- Growing emphasis on sustainable building practices
- Potential for innovative space solutions like pop-up logistics facilities
Richard Barkham, CBRE's Global Chief Economist, described the 7% availability rate as "unexpectedly optimistic" and expressed confidence in continued strong demand through 2023. However, he cautioned market participants to maintain long-term perspectives when making space commitments.