U.S. Industrial Rents Keep Growing Even As Vacancy Ticks Up

The industrial sector cooled in 2024, but the market proved resilient as steady activity through the year helped ease concerns about a supply glut.

U.S. industrial vacancy increased to 6.7% in the fourth quarter but remains 30 basis points below the 10-year prepandemic average, according to new data from Cushman & Wakefeld. Fourth-quarter leasing activity remained muted at 130M SF, but U.S. markets ended the year with roughly 135M SF of positive annual absorption. 

Rents rose to $10.13 per SF in the fourth quarter, a 1% increase from the previous quarter and up 4.5% year-over-year. 

“After a year of hesitancy, logistics is entering a new, sustained growth phase,” Jason Tolliver, president of the Cushman & Wakefield logistics and industrial services segment, said in a statement. “Corporate capital is being deployed to optimize supply chains, diversify networks, and minimize potential risks.”

This year will be characterized by a bias for action after occupiers spent 2024 assessing their footprints, Tolliver said. 

Vacancy is approaching peak levels nationally, and Cushman & Wakefield saw positive annual absorption in 60% of the 84 markets the brokerage tracked, said Jason Price, senior director and head of logistics and industrial research for the Americas. 

Q4 leasing volume was down nearly 16% from a year prior. The sector ended the year with 591M SF in deals, down 4.8% year-over-year but still the sixth-strongest year for new deal activity tracked by Cushman & Wakefield. 

The peak in vacancy will be aided by the deceleration of new construction after a pandemic-era development boom. There was 291M SF under construction at the end of 2024, a 36% decline from the prior year.

Much of the 85M SF of new industrial space that delivered in the fourth quarter came online without a tenant in place, according to Cushman & Wakefield. The backlog of under-construction projects will put upward pressure on vacancy, but new construction starts have plummeted. 

The development pipeline of industrial properties is at its lowest level since 2018, and roughly a third of new construction is build-to-suit projects that will come online occupied. 

“We've witnessed an uptick among firms looking to lease larger buildings to support their omnichannel fulfillment strategies,” Tolliver said. “Meanwhile, we're also seeing a flurry of activity to support forward-deployed stock models, a strategy that keeps products closer to the market they serve and where customers order them.”

Industrial landlords faced a generally sluggish market in 2024 after years of frenzied pandemic-era leasing shifted to a slower, more deliberate pace of activity. 

But there are early signs that industrial users are shifting back to expansion, including the world’s largest industrial user. 

Amazon spent more than $2B on industrial assets and land, including for data center development, more than twice its spend in 2023, when the company was instead focused on trimming its footprint.

Last month, the e-commerce behemoth paid $162M for 200 acres in California’s Inland Empire, a key industrial market where The Real Deal reported in May that a supply bubble was dragging down rents.