The US industrial real estate market demonstrated remarkable resilience in the second quarter of 2024, according to the latest report from Cushman & Wakefield. While concerns about oversupply persisted, robust demand from logistics sectors and e-commerce companies helped stabilize warehouse rental prices across most markets.
Market Stabilizes as Logistics Sector Shows Resilience
Contrary to earlier predictions of a market downturn due to new warehouse construction, the industrial real estate sector maintained stability through several key factors:
- Continued e-commerce growth: While expansion has slowed, online retail remains a primary driver of warehouse demand.
- Supply chain restructuring: Businesses are seeking more resilient logistics solutions, increasing demand for storage facilities.
- Manufacturing reshoring: Government incentives are bringing production back to the US, particularly in industrial regions.
- 3PL expansion: Third-party logistics providers continue to expand operations to meet e-commerce fulfillment needs.
Demand Remains Strong for Modern Facilities
The market absorbed 29.9 million square feet of industrial space in Q2, maintaining pace with Q1 levels. Notably, warehouses built after 2023 accounted for over 50 million square feet of absorption, indicating strong preference for modern facilities with:
- Advanced automation systems
- Higher clear ceilings
- Larger loading docks
- Improved infrastructure
Regional Variations Emerge
While national metrics remained positive, the Western US experienced negative absorption of 2.3 million square feet, with notable declines in:
- Inland Empire: -1.8 million sq ft
- Los Angeles: -1.1 million sq ft
Factors contributing to Western challenges include slowing e-commerce growth, high operating costs, port congestion, and increased competition.
Key Market Metrics
Leasing activity: Q2 saw 157 million sq ft leased, a 3.4% quarterly increase but 1% year-over-year decline.
New supply: 71.5 million sq ft delivered in Q2, down 44.6% year-over-year, with 68% concentrated in Southern and Western markets.
Vacancy rates: Nationwide vacancy rose slightly to 7.1%, while small warehouses (under 100,000 sq ft) maintained 4.4% vacancy.
Rental rates: Average asking rents reached $10.12/sq ft, up 2.6% year-over-year, with small warehouses commanding premiums at $13.51/sq ft.
Expert Outlook
Jason Price, Cushman & Wakefield's Americas Head of Logistics & Industrial Research, noted that tariff stabilization and trade agreements have provided market certainty. While 2025-2026 may see supply exceeding demand, 2027 is projected to bring demand recovery.
The current 7.1% vacancy rate aligns with pre-pandemic 15-year averages, with most vacancies concentrated in newly built speculative properties rather than existing facilities.
Strategic Recommendations for E-commerce Businesses
- Monitor regional market conditions for optimal leasing opportunities
- Evaluate modern warehouse features that can improve operational efficiency
- Consider flexible lease terms to adapt to changing market conditions
- Assess automation investments to offset potential rent increases
- Explore multi-regional distribution strategies to mitigate local market risks
The report concludes that while market conditions vary by region, the overall industrial real estate sector remains fundamentally healthy, with e-commerce continuing to drive long-term demand for quality warehouse space.