Industrial valuations took a dive in October, according to Green Street, which reported its industrial property price index was down 9.3% month-over-month, a steeper drop than the all-property index, which decreased 3.3%.

Compared with a year ago, industrial eked out a gain of 1%, but softening in the industrial market over the course of 2023 made its way into property values for October.

Demand for industrial space, which spiked during the early years of the pandemic, has subsided in numerous markets, even as an overhang of development continues.

Data released Wednesday by JLL highlighted the supply-demand imbalance in the market nationwide. A record 162M SF of new industrial product delivered in Q3, according to JLL, while absorption fell to 90M SF, its lowest level since 2015.

Most major players in the space have characterized industrial's slowdown as a normalization from the record-setting years of growth in 2021 and 2022. The inventory coming online has loosened up impossibly tight markets in places like Los Angeles and gives tenants a bit more leverage than they have had in recent years.

The trends are reflected in local markets as well.

In Denver, industrial absorption declined by 72% in October from the same time last year, while Q3 industrial leasing activity in Houston was down 25% from last year, and vacancy is on the rise.

In Chicago, industrial leasing activity in Q3 dropped to 4.7M SF, less than half of the 9.9M SF clocked in the second quarter, even as a massive amount of space came on the market: 12.8M SF, the most in a single quarter since early 1999. Almost all of that new space was developed on spec.

Green Street's index for multifamily, the other pandemic-era darling, also fell from September to October by 8.6%

All properties are down 7% year-over-year. Compared with the recent peak for valuations in March 2022, industrial property values are off 16% and multifamily is down 29%. All properties are down 19% from that peak.

“The rise in Treasury yields over the past couple of months has caused buyers to pull back,” Green Street co-Head and Managing Director of Strategic Research Peter Rothemund said in a statement. “Rates have come in quite a bit recently, but they remain high enough to cause further declines in property pricing.”

Other property types experienced no movement in pricing at all in October, Green Street reported, including malls, strip centers, hotels, offices, net lease and self-storage.

The largest year-over-year drop in valuation has been in the office sector, which declined by 21%, according to Green Street. Malls have gained 8% over the year, and hotels were up 1%.