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Five years ago, when pandemic pushed e-commerce into new highs, the industrial warehouse became the largest commercial real estate game. It began to slow down in 2022, but now the economic uncertainty, which has been caused by constantly changing tariff policy and persistently high inflation, is more powerful.
In the first half of this year, only 27 million square meters of industrial areas were absorbed, and the demand in the second quarter alone – the first quarterly decline since 2010 – was 11.3 million back – according to a August report by Naiop, a Commercial Real Estate Development Association.
Since the uncertainty is expected to continue until the end of this year, Naiop projects will be “almost flat” in the second half of this year.
“The demand for industrial areas is expected to recover somewhat after the occupiers have time to adapt to a new customsization regime,” the authors of the report wrote. “However, higher tariffs and the slowdown of employment growth will probably lead to slower demand growth than that from 2020 to 2022 or in the six years that preceded pandemic.”
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Naiop predicts the absorption, which depends on the second quarter of 2026, whereby the absorption of the total year is 119.3 million square foot. In the first half of 2027 it expects a further 109.7 million square foot absorption.
According to a separate report by Yardi, they meet this year's sales with industrial real estate only to meet the pace of the previous year. Industrial sales amounted to $ 74.3 billion in 2024, which increased by 14.7% compared to 2023, but declined in 2021.
The price estimate also cooled after enormous profits between 2019 and 2022 when the average sales price of an industrial property rose by 54%.
“The capital was cheap, and investors wanted to benefit from the record growth of record rents, which is due to historically low industrial vacancy rates that fall back next to the offer,” the report said.
So far, according to the Yardi report, the average sales price for completed industrial transactions has only been 6% higher than the average of 2022.
The national industrial vacancy rate in July was 9.1%, around 10 basis points compared to June and 270 basis points from July 2024. However, the interventions rose by 6.1%compared to the previous year.
“We have made the market for industrial investments of Darling too resilient in recent years, but we expect activities and interest in expecting economic clarity in connection with growing demand for space,” said Peter Kolaczynski, director of Yardi Research.