Demand for Industrial Space Is Slowing Down. But It’s Still a Landlord’s Market.
October 25, 2022 | Patricia Kirk | WealthManagement.com
As U.S., like the rest of the world, continues to grapple with stubborn inflation (at 8.2 percent in September), there are worries that consumer spending is going to falter and impact industrial owners’ ability to raise rents. Industry insiders, however, say such fears are over-stated.
At the moment, industrial real estate fundamentals remain strong and rental rates continue to rise, especially in key coastal markets, according to San Francisco-based Al Pontius, senior vice president, national director for office, industrial and healthcare, at real estate services firm Marcus & Millichap.
Pontius does cite nuances in the marketplace that might point to slowing demand for warehouse space. Such indicators include the depth of prospective tenants and change in landlords’ approach to lease up of new build-to-suit properties. For instance, in January and February of 2022, rental rates were rising so fast that landlords held off on making final deals with tenants until the date of occupancy. “Now landlords are locking in rates right away.”
Industrial tenants also are slower than they were before to make decisions, Pontius adds. As a result, absorption in secondary markets and absorption of older industrial product has slowed down.
