Demand Outpaces New Supply;
Rents at Record Levels

  • The U.S. industrial & logistics (I&L) sector continued to demonstrate strong fundamentals in Q4, with absorption exceeding new supply by 6.3 million sq. ft. This marked the 35th consecutive quarter of positive net absorption—the longest streak since before 2001.
  • The overall availability rate declined by 10 basis points (bps) from the previous quarter to 7.0%—the lowest level since Q4 2000. The vacancy rate remained at 4.3%, maintaining its lowest level since CBRE began tracking this metric in 2002.
  • New supply in Q4 totaled 56.6 million sq. ft., up 5.9% from Q3 but 9.0% less than in Q4 2017. Net absorption exceeded new supply by nearly 30 million sq. ft. for the year, demonstrating both extremely strong demand for Class A logistics space and the difficulty of building such space, especially in the strategic supply chain markets. The under-construction pipeline grew 3.0% quarter-over-quarter to 278.9 million sq. ft.
  • With demand exceeding new supply, net asking rents increased 2.2% in Q4 to $7.37 per sq. ft. —the highest level since CBRE began tracking the metric in 1989. Rents have increased 7.4% year-over-year, one of the largest growth rates in this cycle and exceeding the average annual growth rate of 4.3% since 2012.
  • The major drivers of supply-chain demand—consumer spending, business inventories and industrial production—have all remained steady and are contributing to I&L demand. With the unemployment rate at a multi-decade low, consumer confidence is near its highest level since 2004. While issues related to tariffs and trade have shown no short-term impact on the I&L market, there is concern that, over the long-term, these could create some market volatility.