The industrial real estate sector has been a beacon of resilience in recent years, but signs of turbulence are emerging in several key markets. A wave of new construction combined with plummeting pre-leasing rates could challenge landlords and developers to navigate choppy waters in the coming years.
A Surge of Supply in Key Markets
Industrial markets across the U.S. are experiencing an unprecedented supply boom, with some of the most active construction pipelines in history nearing completion. Notably:
- Dallas-Fort Worth: With availability rates already in the double digits, the influx of new inventory could exacerbate challenges for landlords trying to lease up vacant spaces.
- Phoenix: The construction boom here is the largest in the nation, with 33 million square feet under development. While this should bolster the region’s industrial footprint, one-third of this space won’t be completed until after 2024. Availability rates in Phoenix are forecasted to surpass 12% in 2025, signaling potential challenges for landlords.
- Riverside, Atlanta, and Houston: These established industrial hubs are also poised to see significant new supply hitting the market this year, adding to the leasing pressure.
- Emerging Markets (Savannah and Austin): These cities stand out for their high supply growth, with pipelines representing nearly 12% of their total inventory—making them the only markets in this analysis with double-digit expansion.
For landlords in these regions, attracting tenants to these new spaces will require strategic planning and aggressive leasing efforts to ensure stabilized occupancy rates.
Plummeting Pre-Leasing Rates Pose Challenges
Nationally, pre-leasing activity for completed industrial buildings has seen a dramatic decline. In 2021 and 2022, over 70% of newly completed buildings were pre-leased. However, this figure has now dropped to just 32%, signaling a stark contrast in tenant demand.
The implications of this drop are clear: Landlords in markets like Phoenix, Dallas-Fort Worth, and Savannah will face stiff competition in leasing their spaces, particularly as the market becomes flooded with options. Those who adapt with creative leasing strategies and competitive incentives are likely to fare better in this evolving landscape.
Developers Show Discipline Amid Shifting Dynamics
Despite the oversupply concerns, there’s a silver lining: developers are beginning to show restraint. Construction starts have fallen to their lowest point in the current cycle, suggesting a more measured approach to new developments moving forward. This shift could help balance supply and demand in the long term, mitigating some of the immediate pressure on landlords and investors.
Adapting to the New Industrial Landscape
As industrial markets evolve, landlords and developers must find innovative ways to stand out. For many, this means not only adjusting leasing terms but also adopting cutting-edge marketing strategies to showcase their properties.
VidTech can play a pivotal role here, offering advanced CRE video solutions that combine stunning 4K drone and satellite footage with critical property data overlays. In competitive markets, effective marketing can make all the difference in attracting tenants and ensuring high occupancy rates.
What’s Next?
While the turbulence in industrial markets may create challenges, it also presents opportunities for forward-thinking landlords and developers. By understanding the dynamics of supply and demand, leveraging technology, and adopting creative leasing strategies, stakeholders can navigate these changes successfully.
Learn more about how VidTech can help you elevate your industrial property marketing efforts.
