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The housing market is still savagely unhealthy

Hope for a balanced market is real this year because, with higher rates, we should see more days on the housing market coming up.
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The National Association of Realtors reported that existing home sales for March came in as a miss of estimate at 5.77 million. However, the real story of 2022 is that the savagely unhealthy housing market continues as inventory is still lower than last year, sending home prices growth into double digits again. However, hope for a balanced market is real this year because, with higher rates, we should see more days on the market coming up and growth in the inventory data.

The 5.77 million sales print on Wednesday is in line with my 2022 forecast sales range between 5.74 million and 6.16 million. Last year I discussed sales levels coming back down to 5.84 million, and I am looking for more of the same in 2022, at the 5.74 million level. Like last year, I was anticipating a few prints under 5.84 million. We only got one, and the same with this year under 5.74 million. 

However, unlike the previous year, we have a material change in the U.S. housing market; the 10-year is above 1.94%, something that didn’t happen in 2020 or 2021. This means higher mortgage rates, so we need to talk about the housing market in a rising-rate environment without going into housing crash mode like the professional grifters do for clicks.

From NAR: Total existing-home sales dipped 2.7% from February to a seasonally adjusted annual rate of 5.77 million in March.


Housing demand has been stable for the past few years; we have never had a credit boom in demand since 2002-2005. So, we never had a credit bust as we saw from 2005 to 2008. However, post-2010, we have had times when housing demand has gotten softer with higher mortgage rates.

In 2013-2014, rates rose, and you see the lower trend in sales back then. Demographics and employment levels were much different at that time, so it isn’t the best comp to use compared to 2020-2024, which has the most significant housing demographic (ages 28-34) running at 32.5 million.

In 2018 when mortgage rates rose, we saw existing home sales trend lower from 5.72 million to 4.98 million in January 2019. Even though total existing-home sales didn’t do much in 2018 and 2019, we see how higher rates impacted the demand curve. The housing data we got yesterday with housing starts are backward-looking. The same should be thought about today and going out in the future.


How does application data look? Due to COVID-19, I needed to make severe adjustments because the year-over-year data has been out of whack. This data line has been negative since June of 2021. With proper adjustments, you can tell what is going on.

2022 is looking to be the first actual negative year-over-year purchase application year since 2014. However, the decline is mild so far.
—Week to week: -3%
—Year over year: -14%
—4 week moving average YoY: -975%

The week-to-week action has produced two mild positive and two mild negative prints for four weeks. I believe the COVID-19 comps ran out by mid-February this year. So the year-over-year data is good to go. We are between what we saw in 2018 — with a mild response to higher rates — and 2014, where the reaction was much more severe. When it moves, this data line moves up and down 20%-30%. So the four-week moving average, while a noticeable weakness, isn’t anything too big yet. 




As you can see, the 2018 purchase application data didn’t show much of a reaction; it only had three very mild negative year-over-year prints and stayed true to the seasonal volumes declines we typically see after May.


When rates rose in the middle of 2013, we saw a clear downtrend in purchase application data, and in 2014 we saw a 20% year-over-year decline trend.




2014 was the last year total inventory grew. Sales went down that year, and the growth rate in pricing cooled off. Let’s hope for a similar response in 2022.


NAR:  Total housing inventory at the end of March totaled 950,000 units, up 11.8% from February and 9.5% from one year ago (1.05 million). Unsold inventory sits at a 2.0-month supply at the present sales pace, up from 1.7 months in February and down from 2.1 months in March 2021.

Inventory levels are always seasonal; rising in the spring and summer and fading in the fall and winter. The goal is to get higher inventory data on a year-over-year basis in 2022, and higher rates should do it. Even if we get some positive year-over-year prints, the housing market is still working from all-time lows. However, we have to start somewhere.

My goal has always been the same; we want inventory to get back into a range of 1.52 – 1.93 million. We have a lot of work to do to get back to those levels.



This year, I am “team higher mortgage rates” because the writing was on the wall for another year of unhealthy home prices. We are showing negative year-over-year data in inventory even this week. Since we blew past my 23% home-price growth model for five years in just two years, I need to adjust how I looked at the housing market once rates rose. 

For example, if home prices grew 3% a year in 2020, 2021, and 2022, mortgage rates rising wouldn’t be a big deal. However, in 2020 alone we had 10% home-price growth. I create models to keep us in line with the data and not run into hypothetical situations.

As long as home prices grew at 23% cumulative for five years of total home sales, both new and existing homes should be 6.2 million or higher. However, since we broke that in two years and are still showing 15% home-price growth in 2022, we risk demand being hit harder than usual when rates rise. Well, this is what is happening in 2022.

NAR: The median existing-home price for all housing types in March was $375,300, up 15.0% from March 2021 ($326,300), as prices rose in each region. This marks 121 consecutive months of year-over-year increases, the longest-running streak.    



A big theme of my work regarding higher rates is that we need more days on the market. Higher rates didn’t create more inventory in 2018, but they did generate more days on the market and gave people more choices and time to buy a home. I can’t express enough how savagely unhealthy housing is when days on the market are still running at teenager levels.

NAR: First-time buyers were responsible for 30% of sales in March; Individual investors purchased 18% of homes; All-cash sales accounted for 28% of transactions; Distressed sales represented less than 1% of sales; Properties typically remained on the market for 17 days.

All in all, we still have a savagely unhealthy housing market. However, there is some hope of higher rates creating balance. Wednesday’s existing home sales report and Tuesday’s housing starts data are backward-looking and account for a 5% plus mortgage world. Continuing a years-long trend, the inventory crisis got worse in America in 2022, and we are paying for it in much higher home price costs for homebuyers that don’t have a significant down payment; their cost of shelter just got a lot more expensive than last year.

On the other hand, homeowners are chilling like villains in their lovely homes with their fixed payment loans and enjoying life. It should be an exciting year ahead of us.

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Analyzing Capital Market Trends

As the industrial market sees some cooling from pandemic-era highs and financing tightens, what should owners and investors expect over the next 12-18…

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As the industrial market sees some cooling from pandemic-era highs and financing tightens, what should owners and investors expect over the next 12-18 months? Four national experts took the stage at I.CON West to discuss what lies ahead for this popular asset class.  

Capital Raising is Down, Cash is King 

Overall, institutional capital raising was down 30-40% in 2023. Institutional investors have been wary of open-ended funds, portfolios have been trimmed and deals are happening increasingly in cash. Considering the current lending environment, more investors prefer unlevered deals.  

“I’m always surprised how many groups out there are willing to buy all cash,” said Christy Gahr, director of capital markets, North America, Realterm. “It’s taken off over the last year, especially when the cost of debt is 6%.” 

The private equity market is active, and panelists said they see more investment coming from end users. On the debt side, banks are shying away from speculative development projects and focused on smaller transactions last year. Some investors are taking more of a “rifle shot” approach by focusing on targeted, specific projects rather than casting a wide net. There is also interest from life companies that have some liquidity to invest in stabilized industrial product in first-tier markets. 

Not Much Distress, But More Scrutiny 

PJ Charlton, chief investment officer, CenterPoint Properties, commented he wasn’t seeing much distress and certainly not at 2009 levels. However, there are motivated sellers. It is a suitable time to sell assets out of a fund due to the high leasing rates and spectacular rent growth. “Most sellers today have a reason,” said Tim Walsh, chief investment officer, Dermody, “whether it’s a balance sheet-motivated, whether it’s related to some sort of tax structuring or promises they’ve made to investors.” 

What has changed over the past 2-3 years is the approach of investment committees. “Back then it was about aggregation,” said Charlton. “It was all in on industrial… rents were growing 15% a year, cap rates are down another 50 basis points. Interest rates are 3%…  Investment committees are reading every page and scrutinizing every word now. It’s a much more discerning buyer than it was three years ago,” he said. Investment committees are focusing on projects in healthy rent growth markets such as New Jersey, Los Angeles and Miami with $50-$150 million deal ranges.  

“There is a thesis that there’s a slowdown in developments in all our markets,” said Walsh. “Everyone sees it. There are some submarkets where there weren’t any groundbreakings in the first quarter.” However, there will be an overall return to a balanced supply and demand dynamic. 

Embracing ESG 

Investors and tenants are increasingly recognizing the importance of ESG, and the panel agreed bigger credit and quality tenants tend to be more environmentally focused. Dermody has increased its environmental standards, making sure each of their building roofs can structurally support solar panels and installing piping and wiring the parking lots for electric charging. “There is a lot of noise out there when it comes to NIMBYism,” said Walsh, “And I think we need to do more to promote the modern environmentally sensitive product that we’re all building.” 

Additionally, power supply is becoming more of a concern. “Several years ago, everyone was talking about having the right amount of parking. Now the hot topic is having access to power supply,” said Charlton. Several Fortune 500 companies, including FedEx, have promised to reduce their carbon footprint quickly and that means access to electrified parking. “What we’re seeing is that parking is even more important because now you have fleets that need to be able to charge two or three times a day in last-mile distribution facilities,” said Gahr. “It will change aspects of how we invest and how we underwrite and think about what our properties need to be able to provide our users.”  

Nearshoring and Onshoring  

Jack Fraker, president and global head of industrial and logistics capital markets for Newmark, turned the discussion to what is happening near the U.S.-Mexico border and asked the panelists what they are seeing in terms of nearshoring. Gahr commented that so much has changed in a short period and cited several statistics. For example, since 2019, China alone has invested in more than 120 projects in Mexico and in over 18 million square feet of industrial space. U.S.-Mexico trade is now outpacing U.S.-China trade by more than 40%.  

“During the first half of 2023, $461 billion of goods passed through the U.S.-Mexico border, which is 44% higher than the value of goods between U.S. and China,” said Gahr. More than 150 foreign companies said in 2023 that they will open a new operation or expand into Mexico. These sectors include automotive, energy, manufacturing and IT.  

Texas cities Laredo and El Paso were identified as active border markets, and the panelists agreed the best-performing assets are going to be as close to the border as possible. In 2023, El Paso had over three million square feet in total net absorption with a market wide vacancy of less than 4%, according to CBRE. The panelists also discussed the tremendous amount of opportunity in Mexico, although many U.S. development companies have not yet chosen to invest there. Onshoring activity, such as a Samsung project in Austin, is also on the rise. 

Overall, the panel remained optimistic about investments, the economy and interest rates. Unemployment is below 4% and the economy is still growing. Additionally, the level of capital that’s sitting in money markets right now is “at $6 trillion – and that’s $2 trillion higher than it was five years ago,” according to Walsh. “So, the giant pile of money persists. And it’s available as soon as people are comfortable coming off the sidelines.” 

This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s I.CON West 2024. Learn more about JLL at www.us.jll.com or www.jll.ca.

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Centre for Doctoral Training in Diversity in Data Visualization awarded over £9m funding from the EPSRC

Announced today, a new Centre for Doctoral Training (CDT) has been funded by a grant of over £9 million from the Engineering and Physical Sciences Research…

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Announced today, a new Centre for Doctoral Training (CDT) has been funded by a grant of over £9 million from the Engineering and Physical Sciences Research Council (EPSRC) to help train the next, diverse generation of research leaders in data visualization.

A collaboration between City, University of London and the University of Warwick, the EPSRC Centre for Doctoral Training in Diversity in Data Visualization (DIVERSE CDT) will train 60 PhD students, in cohorts of 12 students, beginning in October 2025. The set-up phase will begin in July 2024.

The funding announcement is part of a wider UK Research & Innovation (UKRI) announcement of the UK’s biggest-ever investment in engineering and physical sciences postgraduate skills, totalling more than £1 billion.

DIVERSE CDT will be supported by 19 partner organisations, including the Natural History Museum, the Ordnance Survey, and the Centre for Applied Education Research.

Data Visualization is the practice of designing, developing and evaluating representations of complex data – the kinds of data that lie at the heart of every organization – to enable more people to make real-world use of a source of information which is otherwise challenging to access.

Data visualization can be used to synthesise complex data into a clear story upon which actions can be based. From illustrating how the Covid-19 pandemic made countries poorer, to showing how the processing-power of cryptocurrencies may have driven up the price of high-street graphics cards; data visualization is crucial to society obtaining meaning from data.

However, no current CDT focuses upon training its students in data visualization. This is despite government’s Department of Digital, Media, Culture and Sport listing data visualization as one of the top five skills needed by businesses – with 23% of businesses saying that their sector has insufficient capacity. Likewise, Wiley’s Digital Skills Gap Index, 2021, listed data visualization as the third most needed business and organisational skill for employees to succeed in the workplace in the next five years.

Key innovations of DIVERSE CDT will include students:

Credit: Alex Kachkaev and Jo Wood, City, University of London

Announced today, a new Centre for Doctoral Training (CDT) has been funded by a grant of over £9 million from the Engineering and Physical Sciences Research Council (EPSRC) to help train the next, diverse generation of research leaders in data visualization.

A collaboration between City, University of London and the University of Warwick, the EPSRC Centre for Doctoral Training in Diversity in Data Visualization (DIVERSE CDT) will train 60 PhD students, in cohorts of 12 students, beginning in October 2025. The set-up phase will begin in July 2024.

The funding announcement is part of a wider UK Research & Innovation (UKRI) announcement of the UK’s biggest-ever investment in engineering and physical sciences postgraduate skills, totalling more than £1 billion.

DIVERSE CDT will be supported by 19 partner organisations, including the Natural History Museum, the Ordnance Survey, and the Centre for Applied Education Research.

Data Visualization is the practice of designing, developing and evaluating representations of complex data – the kinds of data that lie at the heart of every organization – to enable more people to make real-world use of a source of information which is otherwise challenging to access.

Data visualization can be used to synthesise complex data into a clear story upon which actions can be based. From illustrating how the Covid-19 pandemic made countries poorer, to showing how the processing-power of cryptocurrencies may have driven up the price of high-street graphics cards; data visualization is crucial to society obtaining meaning from data.

However, no current CDT focuses upon training its students in data visualization. This is despite government’s Department of Digital, Media, Culture and Sport listing data visualization as one of the top five skills needed by businesses – with 23% of businesses saying that their sector has insufficient capacity. Likewise, Wiley’s Digital Skills Gap Index, 2021, listed data visualization as the third most needed business and organisational skill for employees to succeed in the workplace in the next five years.

Key innovations of DIVERSE CDT will include students:

  • undertaking and relating a series of applied studies with world-leading industrial and academic partners through a structured internship programme and an exchange programme with 18 leading international labs
     
  • using an interactive digital notebook for recording, reflection and reporting which becomes a “thesis” for examination, in lieu of the traditional doctoral thesis, and in line with current best practice in data visualization methodology
     
  • being provided with tools that mitigate against the dreaded isolation that PhD students fear, including opportunities for cohort reflection and supportive inclusion via enriching and inclusive processes for admissions, support, and a research environment that addresses barriers for students from under-represented backgrounds; specifically students who identify as female, students from ethnic minority backgrounds and students from lower socio-economic groups.

DIVERSE CDT will be led by Professor Stephanie Wilson, Co-Director of the Centre for HCI Design (HCID) and Professor Jason Dykes, Professor of Visualization and Co-Director of the giCentre, both of the School of Science & Technology at City, University of London.

Members of DIVERSE CDT’s interdisciplinary team include:

  • Professor Cagatay Turkay and Dr Gregory McInerny from the Centre for Interdisciplinary Methodologies, University of Warwick
  • Dr Sara Jones, Reader in Creative Interactive System Design, Bayes Business School at City
  • Professor Rachel Cohen, Professor in Sociology, Work and Employment, School of Policy & Global Affairs at City
  • Professor Jo Wood, Professor of Visual Analytics, and Dr Marjahan Begum, Lecturer in Computer Science, School of Science & Technology at City
  • Ian Gibbs, Head of Academic Enterprise at City.
     

Reflecting on DIVERSE CDT, Co-Principal Investigator, Professor Stephanie Wilson said:

“This funding represents a significant investment from the EPSRC and partner organisations in our vision of an innovative approach to doctoral training. We are delighted to have the opportunity to train a new and diverse generation of PhD students to become future leaders in data visualization.”

Professor Cagatay Turkay said:

“I am thrilled to see this investment for this exciting initiative that brings City and Warwick together to train the next generation of data visualization leaders. Together with our stellar partner organisations, DIVERSE CDT will deliver a transformative training programme that will underpin pioneering interdisciplinary data visualization research that not only innovates in methods and techniques but also delivers meaningful change in the world.”

Dr Sara Jones said:

“I’m really excited to be part of this great new initiative, sharing some of the innovative approaches we’ve developed through the interdisciplinary Centre for Creativity in Professional Practice and Masters in Innovation, Creativity and Leadership, and applying them in this important field.”

Professor Rachel Cohen said:

“DIVERSE CDT puts City at the heart of interdisciplinary data visualization. Data are increasingly part of the social science and policy agenda and it is imperative that those charged with visualizing data understand both the technical and social implications of visualization”

“The CDT is committed to developing and widening the group of people who have the cutting-edge skills needed to visualize, interpret and represent key aspects of our everyday lives. As such it marks a huge step forward both in terms of skill development and representation.”

Professor Leanne Aitken, Vice-President (Research), City, University of London, said:

“Growing the number of doctoral students we prepare in the interdisciplinary field of data visualization is core to our research strategy at City. Doctoral students represent the future of research and expand the capacity and impact of our research. The strength of the DIVERSE CDT is that it draws together our commitment to providing a supportive environment for students from all backgrounds to undertake applied research that challenges current practices in partnership with a range of commercial, public and third sector organisations. This represents an exciting expansion in our doctoral training provision.”

Professor Charlotte Deane, Executive Chair of the EPSRC, part of UKRI, said:

“The Centres for Doctoral Training announced today will help to prepare the next generation of researchers, specialists and industry experts across a wide range of sectors and industries.

“Spanning locations across the UK and a wide range of disciplines, the new centres are a vivid illustration of the UK’s depth of expertise and potential, which will help us to tackle large-scale, complex challenges and benefit society and the economy.

“The high calibre of both the new centres and applicants is a testament to the abundance of research excellence across the UK, and EPSRC’s role as part of UKRI is to invest in this excellence to advance knowledge and deliver a sustainable, resilient and prosperous nation.”

Science and Technology Secretary, Michelle Donelan, said:

“As innovators across the world break new ground faster than ever, it is vital that government, business and academia invests in ambitious UK talent, giving them the tools to pioneer new discoveries that benefit all our lives while creating new jobs and growing the economy.

“By targeting critical technologies including artificial intelligence and future telecoms, we are supporting world class universities across the UK to build the skills base we need to unleash the potential of future tech and maintain our country’s reputation as a hub of cutting-edge research and development.”

ENDS

Notes to editors

Contact details:

To speak to City, University of London collaborators, contact Dr Shamim Quadir, Senior Communications Officer, School of Science & Technology, City, University of London. Tel: +44(0) 207 040 8782 Email: shamim.quadir@city.ac.uk. 

To speak to University of Warwick collaborators contact Annie Slinn, Communications Officer, University of Warwick. Tel: +44 (0)7392 125 605 Email: annie.slinn@warwick.ac.uk

Further information

Example data visualization (image)

Bridges – Alex Kachaev and Jo Wood.

Link to image: bit.ly/3Iy3BRz Credit: Alex Kachkaev and Jo Wood, City, University of London

Data visualization for the Museum of London by Alex Kachkaev (a PhD student) with supervisor Joseph Wood, illustrating where people in London congregate in both inside and outside spaces, showing how a creative use of data can be used to build a picture of human behaviour.

Collaborating labs

Collaborators on the international exchange programme comprise the world’s leading visualization research labs, including the Visualization Group at Massachusetts Institute of Technology (MIT), USA,  the Embodied Visualisation Group, Monash University, Australia;  Georgia Tech, USA;  AVIZ, France; the DataXExperience Lab, University of Calgary, Canada,  and the ixLab, Simon Fraser University, Canada.

About the funder

The Engineering and Physical Sciences Research Council (EPSRC) is the main funding body for engineering and physical sciences research in the UK. Our portfolio covers a vast range of fields from digital technologies to clean energy, manufacturing to mathematics, advanced materials to chemistry. 

EPSRC invests in world-leading research and skills, advancing knowledge and delivering a sustainable, resilient and prosperous UK. We support new ideas and transformative technologies which are the foundations of innovation, improving our economy, environment and society. Working in partnership and co-investing with industry, we deliver against national and global priorities.

About City, University of London

City, University of London is the University of business, practice and the professions.  

City attracts around 20,000 students (over 40 per cent at postgraduate level) from more than 150 countries and staff from over 75 countries. In recent years City has made significant investments in its academic staff, its infrastructure, and its estate. 

City’s academic range is broadly-based with world-leading strengths in business; law; health sciences; mathematics; computer science; engineering; social sciences; and the arts including journalism, dance and music. 

Our research is impactful, engaged and at the frontier of practice. In the last REF (2021) 86 per cent of City research was rated as world leading 4* (40%) and internationally excellent 3* (46%).  

We are committed to our students and to supporting them to get good jobs. City was one of the biggest improvers in the top half of the table in the Complete University Guide (CUG) 2023 and is 15th in UK for ‘graduate prospects on track’. 

Over 150,000 former students in 170 countries are members of the City Alumni Network.  

Under the leadership of our new President, Professor Sir Anthony Finkelstein, we have developed an ambitious new strategy that will direct the next phase of our development.  

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Economic Trends, Risks and the Industrial Market

By a show of hands, I.CON West keynote speaker Christine Cooper, Ph.D., managing director and chief U.S. economist with CoStar Group, polled attendees…

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March 12, 2024

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By a show of hands, I.CON West keynote speaker Christine Cooper, Ph.D., managing director and chief U.S. economist with CoStar Group, polled attendees on their economic outlook – was it bright or bleak? The group responded largely positively, with most indicating they felt the economy was doing better than not.  

Four years ago, the World Health Organization declared COVID-19 a global pandemic, seemingly halting life as we knew it. And although those early days of the pandemic seem like a long time ago, we’re still in recovery from two of its major consequences: 1) the $4 trillion in economic stimulus that the U.S. government showered on consumers; and 2) the aggressive monetary policies that have created ripple effects on the industrial markets. 

Cooper began with an overview of the economic environment, which she called “the good news.” The nation’s GDP is strong, and the economy gained momentum in the second half of 2023 – we saw economic growth of 4.9% and 3.2% in Q3 and Q4 respectively — much higher than expected. “The reason is consumers,” Cooper said. “When things get tough, we go shopping. This generates sales and economic activity. But how long can it last?” 

Consumer sentiment continues to be healthy, and employment is good, although a shortage of workers could impact that moving forward. The U.S. added 275,000 jobs in January, far exceeding expectations. “The Fed raising interest rates hasn’t done what it normally does – slow job growth and the economy,” said Cooper. In addition, the $4 trillion given to keep households afloat during the pandemic has simply padded checking accounts, she said, as consumers couldn’t immediately spend the money because everyone was staying home, and the supply chain was clogged. The money was banked, and there’s still a lot of it to be spent. 

Cooper addressed economic risks and the weak points that industrial real estate professionals should be mindful of right now, including mortgage rates that remain at 20-year highs, stalling the housing market, particularly for new home buyers. Mid-pandemic years of 2020-2021 had strong home sales, driven by people moving out of the city or roommates dividing into two properties for more space and protection against the virus. Homeowners who refinanced in the early stages of the pandemic were fortunate and aren’t willing to list their houses for sale quite yet. 

“The housing market is a big driver of industrial demand – think furniture, appliances and all the durable goods that go into a home. This equates to warehouse space demand,” said Cooper. 

Interest rates on consumer credit are spiking and leading economic indexes are still signaling a recession ahead. Financial markets are indicating the same, with a current probability of 61.5% that we will be in a recession by 2025. However, Cooper said, while all signs point to a recession, economists everywhere say the same thing as the economy seemingly continues to surprise us: “This time is different.” 

Consumers are still holding the economy up with solid job and wage gains, yet higher borrowing costs are weighing on business activity and the housing market. Inflation has eased meaningfully but remains a bit too high for comfort. We’ve so far avoided the recession that everyone predicted, and the Federal Reserve appears ready to cut rates this year.  

For the industrial markets, the good news is that retailer corporate profits are beginning to bounce back after slowing in 2021 and 2022, with retail sales accelerating.  

A slowdown in industrial space absorption was reflected in all the key markets – Atlanta, Chicago, Columbus, Dallas-Fort Worth, Houston, the Inland Empire, Los Angeles, New Jersey and Phoenix – but was worst in the southern California markets, which have since been rebounding.  

“Supply responded to strong demand,” Cooper said. “In 2021, 307 million square feet were delivered, followed by 395 million in 2022. In 2023, we saw 534 million square feet delivered – that’s almost 33% higher than the year before.” 

The top 20 markets for 2023 deliveries measured by square feet are the expected hot spots: Dallas-Fort Worth (71 million square feet) leads the pack by almost double its follower of Chicago (37 million), then Houston (35 million), Phoenix (30 million) and Atlanta (29 million). Measured by share of inventory, emerging markets like Spartanburg, Pennsylvania, topped the list at 15 million square feet, followed by Austin (10 million), Phoenix and Dallas-Fort Worth (7 million), and Columbus (6 million). 

“Developers are more focused on big box distribution projects, and 90% of what’s being delivered is 100,000 square feet or more,” Cooper said. Around 400 million square feet of space currently under construction is unleased, in addition to the around 400,000 square feet that remained unleased in 2023. “Putting supply and demand together, industrial vacancy rate is rising and could peak at 6-7% in 2024,” she said. 

In conclusion, Cooper said that industrial real estate is rebalancing from its boom-and-bust years. Pandemic-related demands and accelerated e-commerce growth created a surge in 2021 and 2022, and the strong supply response that began in 2022 will continue to unfold through 2024. With rising interest rates putting a damper on demand in 2023, vacancies began to move higher and will continue to rise this year.  

“Consumers are spending and will continue to do so, and interest rates are likely to fall this year,” said Cooper. “We can hope for a recovery from the full effects of the pandemic in 2025.” 

This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s I.CON West 2024. Learn more about JLL at www.us.jll.com or www.jll.ca.

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