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Softening fundamentals have caused a sharp increase in industrial availability rates over the past three years. The two charts below tell the tale.

The industrial leasing boom reached a peak in mid-2022. A year later, in Q3 2023, availability had surpassed its long-term average in 40% of the 20 largest U.S. industrial markets. By Q4 2024, this share has risen to 70%.

Several factors are at work here. One is over-development, which, for example, has driven a three-fold increase in Phoenix’s availability rate since Q3 2022. Another is occupier reluctance to pay high rental rates, which has slackened demand in Southern California. Interestingly, cities with tight fundamentals, such as Cleveland and Detroit, are often overlooked by capital and developers and thus their industrial inventories have grown only modestly.

Figure 1: Availability Rate Relative to Longer-Term Trend