The Industrial Market is Still Hungry for Space
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?
The forecast for North American industrial absorption from 2021 to 2022 is a healthy 481.3 million square feet (msf). New supply—which has surpassed demand two years in a row—will maintain this trend over the next two years. New deliveries are projected to reach 697.3 msf of product from 2021 to 2022. Nonetheless, North American vacancy will remain low, ending 2022 at 6.2%—an increase of only 130 basis points (bps) over year-end 2020. Despite the forecasted uptick, North American vacancy will remain nearly on par with its 10-year average (2012-2021) of 6%. Average net asking rents for classes of industrial product will rise to a new nominal high of $6.97 per square foot (psf) at year-end 2022. Supply-side constraints, such as onerous municipal approval processes, will continue to constrain supply growth in Canada where overall net rents will remain the highest in North America at USD$10.19 psf by the close of 2022.
Key Takeaways:
- Industrial demand is booming, but so is supply
- Pent-up demand story forming—expect economic surge in back half of 2021
- Fundamentals to continue generating solid rent growth throughout the next few years
- Global trade expected to rise as economic growth accelerates and trade tensions ease, boosting demand
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