U.S. Industrial Net Absorption Turns Negative For First Time In 15 Years: Newmark
As the industrial market continues to weigh tariff concerns and consumer habits, players in the segment aren't as interested in growing their footprint.
The nationwide market experienced its first quarter of negative net absorption since 2009, with occupiers vacating 1.3M SF more than they leased, according to Newmark. The drop comes as occupiers reassess the space they need and consolidate or restructure to preserve margins.
Total net absorption in the first half was 47.4M SF, down 35% year-over-year.
Uncertainty around new international levies remains a concern as the effective tariff rate fluctuates between 13.9% and 32.8%, according to Newmark.
The Trump administration increased tariffs on all Canadian imports to 35% from 25% earlier this month, while Mexico and China were given a 90-day extension to work out trade agreements.
Still coming down from the buzz of the pandemic, industrial construction contracted for the 11th consecutive quarter, with 282.4M SF under construction, the least since 2018.
Industrial staffing has remained relatively flat, and manufacturing saw a three-month decrease as companies aim to reduce staffing in the near to intermediate term.
On top of that, other companies have completely closed, with U.S. corporate bankruptcies at the highest levels since 2010. Joann's bankruptcy led to significant warehouse vacancies in California and Ohio, according to Newmark.
But not all is gloomy, as consumer spending has increased, driving demand from e-commerce and major retailers.
Earlier this week, Amazon announced plans to expand its same-day grocery delivery service to more than 1,000 cities. The tech giant will utilize its same-day logistics network for now.
The manufacturing construction sector is also seeing record highs in spending, at $116B in June, nearly double that of prepandemic averages.
Although occupiers are looking to consolidate, some are looking to lease new space in specific destinations. Markets including Dallas, Chicago and Greenville-Spartanburg, South Carolina, saw meaningful quarter-over-quarter upticks in leasing.
