2024 Industrial Recap, 2025 Predictions 

In 2024, the U.S. industrial real estate sector experienced a period of stabilization following several years of rapid growth. The national vacancy rate increased to approximately 7.5% by November, a notable rise from sub-4% levels two years prior. This uptick was largely due to a significant influx of new supply, with over 1.1 billion square feet delivered between 2022 and 2023, and an additional 330.7 million square feet completed in 2024. However, construction starts declined to 208.7 million square feet, indicating a slowdown in new developments. Despite these changes, industrial transactions remained robust, totaling $54.6 billion through November, with assets trading at an average of $128 per square foot—a 2.7% increase from the previous year. 

The sector faced challenges, including higher interest rates and increased borrowing costs, which led to a cooling of demand. Notably, the vacancy rate climbed to 6.8% from 4.9% the previous year, reflecting the market's adjustment to the surge in supply. Despite these hurdles, the industrial market showed signs of resilience, with leasing activity in the third quarter of 2024 nearly matching the previous year's total. This suggests that while the market has cooled from its peak pandemic-driven expansion, it is moving towards a more balanced state. 

Looking ahead to 2025, the U.S. industrial real estate market is expected to enter a new cycle, returning to pre-pandemic demand drivers. Occupiers are anticipated to focus on longer-term strategies to enhance warehouse efficiency, ensure supply chain resiliency, and meet evolving consumer needs. With construction deliveries projected to taper off by midyear, the overall vacancy rate is expected to stabilize around the 10-year average of 5.0% before declining slightly in the latter half of the year. Leasing activity is predicted to remain steady, with annual volumes around 750 million square feet, aligning with pre-pandemic levels. This outlook suggests a tenant-friendly market, with demand stabilizing and a focus on efficiency and resilience.

Overview of the Carolinas

In 2024, the industrial real estate market in the Carolinas experienced significant growth, driven by a surge in manufacturing expansions and robust leasing activity. North Carolina led the nation in manufacturing job announcements, reflecting a strong trend toward reshoring and foreign direct investment. 

Charlotte, in particular, saw a record 9.2 million square feet of industrial space delivered in the first half of the year, accounting for 21% of the Southeast's total. However, this rapid development led to a rise in vacancy rates, reaching a post-COVID high of 7.5% by the third quarter, with a significant portion of vacant space in buildings constructed after 2021. 

Looking ahead to 2025, the Carolinas' industrial market is expected to stabilize as it transitions to pre-pandemic demand drivers. Occupiers are anticipated to focus on enhancing warehouse efficiency and supply chain resilience to meet evolving consumer needs. While leasing activity is projected to return to pre-pandemic levels, vacancy rates may remain elevated in older properties due to a continued preference for newer, high-quality spaces. Overall, the market is expected to remain tenant-favorable but should tighten toward the end of the year, with institutional capital likely returning to the sector.