As e-commerce and supply chain transformations fuel demand, the sector faces constraints from land scarcity and infrastructure limitations.
Market Overview: Record-Low Availability
CBRE's latest data reveals the U.S. industrial property availability rate has dropped to 7.0% — the lowest level since 2000. This marks the 34th consecutive quarter of declining availability, the longest streak since CBRE began tracking this metric in 1988.
The availability rate encompasses both vacant spaces and currently occupied spaces actively marketed for new tenants. This dual measurement provides a comprehensive view of market dynamics:
- Vacant spaces: Immediately available for lease or purchase
- Sublease spaces: Currently occupied but being marketed due to tenant relocations or downsizing
Regional Variations and Supply-Demand Imbalance
While 38 markets saw availability decline in Q4, 20 markets experienced increases — demonstrating significant regional disparities. The national net absorption reached 63 million square feet, outpacing new construction completions of 57 million square feet.
This supply-demand gap narrowed slightly from Q3's 9.3 million square feet deficit but maintained an annual imbalance of 29 million square feet for 2018. CBRE economists emphasize that while quarterly fluctuations occur, the structural undersupply represents a persistent market condition.
Market Fundamentals and Long-Term Outlook
"Industrial fundamentals remain exceptionally strong," notes CBRE's report. "The widening gap between demand and supply indicates the sector is in the late-cycle strength phase." The firm identifies several sustaining factors:
- Continued e-commerce expansion
- Supply chain reconfiguration
- Strong labor market conditions
- Sustained consumer activity
However, analysts caution about emerging headwinds including rising interest rates, reduced fiscal stimulus, and potential trade policy impacts. Richard Barkham, CBRE's Global Chief Economist, particularly highlights the need to monitor "pop-up logistics spaces" — flexible short-term warehousing solutions that address acute space shortages.
Key Growth Drivers
E-Commerce Acceleration
The sector's primary growth engine stems from online retail's relentless expansion. Amazon and other retailers continue aggressively expanding their logistics networks, requiring strategically located fulfillment centers to meet delivery expectations.
Supply Chain Transformation
Companies are redesigning distribution networks for resilience, driving demand for modern facilities featuring automation and vertical storage solutions. This shift particularly benefits markets near major population centers.
Challenges and Innovations
The sector faces three primary constraints:
- Land scarcity: Urban infill locations command premium pricing
- Labor shortages: Warehouse operators face staffing challenges
- Infrastructure limitations: Aging transportation networks create bottlenecks
Industry responses include:
- Automation investments (robotics, AI-powered systems)
- Multi-story warehouse development
- Sustainability initiatives (green buildings, renewable energy)
Investment Considerations
Market participants should:
- Conduct thorough regional analyses
- Assess long-term lease viability
- Diversify portfolios across geography and asset types
- Partner with specialized industrial real estate teams
While cyclical adjustments may occur, structural demand drivers position the U.S. industrial real estate market for sustained growth. Market participants who navigate the current challenges while capitalizing on innovation opportunities will be best positioned for success.