Q2 2024 numbers and analysis about the industrial sector reported similar findings: A dwindling pipeline and increased vacancies. Furthermore, absorption overall slowed on a year-over-year basis. “Industrial market performance across North America continued to downshift in the first half,” noted Lee & Associates’ Q2 2024 North America Market Report. Savills’ State of the U.S. Industrial Market Q2 2024 Report agreed, summing it up by saying: “The industrial market is approaching a cyclical bottom, with supply correcting. Yet demand recovery hinges on waning consumer spending.”

Double-Edged Absorption Metrics

All the second quarter reports concurred that absorption in Q2 nearly doubled from its Q1 totals. However, the CBRE Q2 2024 U.S. Industrial Report explained that despite the higher numbers, “YTD absorption was down 50% year-over-year.” Cushman & Wakefield’s Q2 2024 U.S. National Industrial MarketBeat Report concurred, adding that most of the net absorption totals consisted of new product deliveries with tenants already in place.

Lee & Associates analysts believed that absorption is on pace for the slowest annual growth since the recession. According to the CBRE experts, one reason for this is because supply continues to outstrip demand, even as deliveries and construction starts continue trending downward.

Vacancies—and Rents—Edge Up

The Colliers U.S. Industrial Market Statistics 24 Q2 Report echoed others by pointing out that vacancies increased in all U.S. region during Q2, though the “pace it is rising has started to slow as quarterly construction completions moderate and demand built back during the quarter.”

Ongoing new supply is a main reason for slowing absorption and falling rent growth. While Plante Moran’s Real Estate Market Report/Industrial Q2 2024 explained that the sector is approaching the end of its “record-making development phase,” it also noted that anticipated new deliveries should increase vacancies in the short term, leading to “the slowest rent growth since 2012.”

The Outlook

The reports agreed that the industrial forecast is one of moderation, a direct contrast to the wild ride of 2021-2022. Plante Moran analysts anticipate that quarterly net supply should fall below the pre-pandemic three-year average by late 2024 and could reach a 10-year low in the latter part of 2025. CBRE agreed, adding that “an expected decrease in completions starting in Q3 2024 should alleviate supply-side pressures in subsequent quarters.”

Savills analysts anticipate an average of 2.5 years to “clear the current space glut and return to 2019 vacancy, with significant variations.” However, the Plante Moran and Cushman & Wakefield analysts painted a slightly different picture. Plante Moran acknowledged that consumer spending stagnation could exert downward pressure on net absorption, however, “the reshoring of high-tech manufacturing to the United States could become a key driver of leasing throughout 2026.”

Cushman & Wakefield analysts showed a little more optimism on the consumer spending side, pointing out that e-commerce growth, as well as onshoring and nearshoring should continue supporting industrial fundamentals, even as vacancy edges higher during 1H 2025.