Leasing to Remain Strong, Encouraging Record Construction while Lifting Rents to New Highs
The tailwinds of e-commerce and heightened focus on supply chain resiliency will certainly keep the market in an upswing with record construction and new all-time high rental rates on the horizon. Potential pandemic headwinds and ongoing tensions with international trade suggest an interesting ride for the North American industrial market over the next two years.
What do we expect in 2021-2022…
|Overall vacancy is expected to gradually rise by about 60 basis points (bps) to 5.8% by year-end 2021 and an additional 40 bps to 6.2% by year-end 2022, alleviating some—but certainly not all—of the pressure on supply-constrained markets throughout North America as new deliveries come online.|
|New deliveries will reach 697.3 million square feet (msf) by 2022 with over 51% of the space delivering in 2021. Occupiers continue to demand new, quality supply from developers as vacancies remain tight and older buildings not able to meet the needs of the tenant.|
|North American industrial rents are expected to reach new all-time highs with average asking rents reaching $6.83 per square foot (psf) NNN in 2021 and $6.97 psf NNN by year-end 2022. While asking rent growth is expected to remain positive, the rate of growth will be more moderate in some markets with industrial rents still increasing.|
|We are forecasting 481 msf of industrial net absorption over the next two years in North America, with more than 200 msf absorbed each year. This shows sustained growth despite the potential for slower take-up as the market recovers from the pandemic.
|Demand will be geographically broad-based over the next two years. Some of the strongest markets will include: Dallas/Fort Worth, Chicago, Atlanta, Inland Empire, Houston, Toronto, Indianapolis, PA I-81/I-78 Corridor, Memphis, Central New Jersey, Kansas City and Vancouver.
Want to find out more? Stay tuned for the full North American Industrial Outlook coming in Q1 2021.
*All numbers are preliminary and subject to change