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Strong Demand for New Industrial Construction Eases Concerns of Oversupply

February 21, 2020

Although 289 million sq. ft. of new industrial supply deliveries exceeded 255 million sq. ft. of net absorption nationwide in 2019, demand for this space was significant and eased any fears of oversupply. By year’s end, only 39% of the space in new construction was available for lease, keeping the overall industrial vacancy rate near its all-time low. With robust pre-leasing, demand for additional supply should continue to keep any potential vacancy rate increase in check.

Markets with highest demand for new space are near major logistics hubs. Kansas City had the lowest vacancy rate for 2019 construction completions at 7.3%, followed by Miami, Baltimore and Greenville, S.C.—all at less than 20%.1 Dallas/Ft. Worth was the best-performing core market last year with nearly 75% of its 25 million sq. ft. in new completions already leased.

Another 309 million sq. ft. of space currently under construction is already 33% preleased, and more than half of the under-construction totals in Charlotte, Cincinnati, Miami, Savannah and St. Louis are committed.

Nine submarkets account for 16.3% of the space currently under construction, including North Ft. Worth and South Atlanta—each with more than 9 million sq. ft. Other submarkets with high levels of new construction in recent quarters include Northeast Atlanta, Ontario, CA and Southeast Houston. These submarkets are within core markets with huge demand for modern distribution space, which is expected to continue in 2020.

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