US Delivers 1.8 Billion Square Feet Of Industrial Development, Outpacing Decade's Output

Since 2020, the United States has seen a surge in industrial development, with 1.8 billion square feet of new space delivered.

This surpasses the total construction output of the entire previous decade. It's being fueled by an over-stimulated economy that resulted in soaring consumer demand for durable goods in 2021 and 2022.

In response, developers raced to construct industrial facilities at an accelerated pace to meet the demand for tenants, who were contending with historically low vacancy rates. Since 2020, 54% of new leases greater than 50,000 square feet were in buildings constructed since 2020, although this represents just 10.7% of the national industrial inventory at the end of last year.

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With lingering uncertainty marked by elevated inflation and high interest rates, tenant demand began to ease. Despite the frantic pace of construction, 52% of the square footage built in 2023 remained available for lease, leading to a nationwide increase in vacancy rates, according to commercial real estate firm Cushman & Wakefield.

 While demand has dropped, tenants still want modern logistics space, resulting in 75% of all net absorption occurring in facilities built over the last three years. Last year, nearly all of the 224 million square feet of net absorption was in newly built, build-to-suit or preleased speculative projects.

Over the past four years, industrial construction deliveries have consistently set new records, reaching a peak of 610 million square feet in 2023. It's a significant increase from the average annual delivery of 169 million square feet over the previous decade. The U.S. industrial market saw the numbers more than triple, delivering more than 1.1 billion square feet in just two years.

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The surge in development was driven by unprecedented tenant demand, combined with historically low vacancy rates in numerous markets nationwide. In 2023, completions contributed to 3.7% of the total industrial inventory across the country, with more than 80% of the projects completed being speculative.

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After the surge in new industrial deliveries in 2022 and 2023, new supply is expected to taper off in the coming years. Of the 452 million square feet under construction in the U.S., Cushman & Wakefield forecasts that just over 330 million square feet will be completed throughout 2024. The recent decrease in new construction starts is expected to further reduce the supply in 2025.

A similar trend is expected in Canada, with projections indicating a 20% year-over-year decline in new supply for 2024 and a 45% decrease over the next two years.

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