Orange County Partnership - News

  • Source: Colliers

Despite Developer Uncertainty, National Industrial Pipeline Remains Full

In a recently released report, brokerage firm Colliers reported that fundamentals continued to improve for the U.S. industrial market in the fourth quarter of 2022. The report, authored by Amanda Ortiz, Director, National Industrial Research for Colliers and Stephanie Rodriguez, National Director, Industrial Services, U.S. for Colliers, noted, “While many developers are approaching the new year with ‘pencils down’ due to economic uncertainty and underwriting difficulties, the development pipeline remains incredibly full and quarterly new supply achieved a new record during the quarter.”


Colliers reported that overall next absorption totaled 124.5 million square feet in the fourth quarter, a new record, as demand for industrial space continued to remain healthy. New industrial supply rose 25.9% year-over-year and the vacancy rate at year’s end dropped 21 basis points from the same time in 2021 to 3.7%.


Overall construction at the end of the fourth quarter was 647.3 million square feet, down slightly from the 654.0 million square feet posted at the end of the third quarter of last year. It should be noted that at the end of the fourth quarter of 2021, there was 499.3 million square feet under construction, according to Colliers’ data.


A deeper dive into the statistics shows that the reshoring movement is becoming a larger part of the new construction market as nearly 100 manufacturing facilities larger than 100,000 square feet were under construction at year’s end, the report noted, totaling more than 40 million square feet of industrial space.


“The automotive industry is leading in developing new semiconductor, EV battery and microchip facilities across the U.S., as the reshoring trend continues to take hold,” the Colliers report stated. In fact, Bloomberg reported that the construction of new U.S. manufacturing facilities increased 116% last year as compared to 2021.


The overall asking rental rate for industrial space in the U.S. was $9.07 (net) per-square-foot, up from $8.72-per-square-foot in the third quarter of 2022 and more than $1-per-square-foot higher than the $7.91-per-square-foot average asking rent posted at the end of 2021.


Colliers predicts that occupancy growth is expected to decelerate as the economic downturn takes hold. However, the report noted, “While absorption may seem to drop sharply compared to historically high levels in 2021 and 2022, large occupiers, including major retailers, 3PL companies, and food and beverage companies, will continue to expand in 2023.”


Other key takeaways from the report:


·       New industrial starts are expected to decline this year.


·       The industrial vacancy rate is expected to rise. As demand wanes and new developments hit the market, Colliers believes the industrial vacancy rate could increase by 120 to 150 basis points.


“While some occupiers may hold off on making major real estate moves in 2023, others may see potential opportunities for expansion as new supply is delivered,” the report stated. “Core markets will continue to perform well, and emerging markets, especially near vital seaports, will grow.”


Colliers said the overall outlook for the industrial market in 2023 “is optimistic, although industrial activity is expected to ease as economic conditions persist.”


To review the entire Colliers report, go to: