Older industrial assets will be challenged as occupier demand softens

Jan 9, 2023, 11:12 AM by Nicholas Rita
Industrial supply growth has lagged significantly behind robust demand for several years due to factors such as lengthy permitting and zoning processes, site preparation requirements and others. As a result, the industrial footprint is aging – three-quarters of the total inventory is more than 20 years old – and often falls short of modern tenant needs for ceiling height, loading dock capacity and other amenities.

Extraordinary tenant demand amid historically tight availability has concealed these shortcomings and forced price-conscious tenants to older, less functional assets.

Now the picture is changing. Demand has receded from historical highs while more than 600 million sq. ft. of new industrial space is under construction and overall availability has ticked up from its Q2 2022 nadir. Tenants whose leases are rolling over will have abundant, amenity-laden space options, further disadvantaging older, less functional properties.

cotw01092023

Deconstructing CRE

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