The U.S. industrial & logistics (I&L) market finished the year with continued positive net absorption, record-high asking rent and a significant amount of new development.
The overall vacancy rate remained unchanged from Q3 at 4.4%, with a marginal 20-basis-point increase year-over-year.
With a pickup in new construction, net absorption rose by 20.1% quarter-over-quarter to 55.7 million sq. ft. in Q4, the 39th consecutive quarter of positive absorption. For full-year 2019, however, absorption fell by 30.7% to 183.3 million sq. ft., largely due to tight conditions in several markets.
224 million sq. ft. of industrial product was completed in 2019, 5.0% less than in 2018. Completions picked up in Q4 and will continue to increase in 2020 with 309 million sq. ft. currently underway.
Average net asking rent rose 0.4% quarter-over-quarter to $7.63 per sq. ft., the 33rd consecutive quarter of rent growth. Rents increased by a quarterly average of 5.1% year-over-year in 2019.
While demand from e-commerce and 3PL occupiers remains strong, the fastest growing industry is food & beverage—largely from grocery companies modernizing supply chains to support growing online sales. This trend is expected to continue in 2020.
Consumer sentiment remains strong and the unemployment rate is at a 50-year low of 3.5%—conditions that highly support
the I&L sector. The fall in GDP growth to 2.3% in 2019 from 2.9% in 2018 has not dramatically impacted I&L market performance given strong retail spending and jobs growth.
Occupiers will continue to improve urban distribution to quickly serve as many customers as possible. Finding creative ways to serve large population centers in markets with record-low I&L vacancy rates will remain a top trend in 2020.