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Industrial Supply May Overtake Demand After 8-Year Marathon

The pace of demand for industrial space across the continent isn’t likely to flag this year or next, Cushman & Wakefield says. That will be the case, even as supply finally catches up in 2020.

In the near term, says Cushman & Wakefield, “backlogs at North American factories remain elevated, suggesting that manufacturers will continue to churn out product.”

Additionally, the firm’s 2019 North American Industrial Outlook says, the “unrelenting proliferation” of SKUs from retailers striving to provide “faster delivery of more products to more locations” will represent a boon for demand.

Domestic absorption will eclipse 245 million square feet for the sixth consecutive year in the U.S. during 2019, while demand in 2020 is expected to track in the low-to-mid 200-million-square-foot range.

Canadian industrial markets will register 33.6 million square feet of net absorption in 2019-2020 with Toronto accounting for over half of that, “but with broad-based improvement across markets,” says Cushman & Wakefield. “As a result, 2019-2020 will continue the longest, and among the strongest, uninterrupted periods of positive net absorption by all Canadian markets.”

In contrast to the U.S. and Canada, Mexico City will remain “dramatically under-supplied” through 2020. Meanwhile, the northern region of Mexico, including Monterrey, will benefit from “improved trade relations with auto manufacturers and the logistics firms that support them,” according to Cushman & Wakefield.

The forecast for North American industrial absorption over the next two years is a “healthy” 494.7 million square feet, Cushman & Wakefield says. Leases in the 10,000- to 100,000-square foot and 300,000- to 500,000-square-foot ranges will drive demand.

However, the firm says, “new supply—which has trailed demand for eight consecutive years—will finally surpass that level during the period.” Cushman & Wakefield projects 548.7 million square feet of new product coming on line by year-end 2020.

Yet, despite supply finally outpacing demand, North American vacancy will remain anchored around the 5% mark, says Cushman & Wakefield. Average asking rents are expected to increase from USD$6.24 per square foot in 2018 to USD$6.68 per square feet by the end of next year.

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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