U.S. Industrial Market

The U.S. industrial market is set to find its footing in 2024 after a period of dynamic change and adaptation. According to CBRE Research, the market will stabilize with net absorption levels similar to 2023 and a moderate rent growth of 8%. Here's a closer look at what to expect in the industrial sector this year. 

Market Stability and Construction

Construction deliveries are expected to decrease significantly by midyear, finishing at approximately half of 2023's total. This reduction will cause the overall vacancy rate to rise to around the 10-year average of 5.0%. However, by the second half of the year, we can anticipate a slight decrease in the vacancy rate. New development activity will remain subdued due to several factors, including tight lending conditions, economic uncertainty, and an oversupply of large warehouse and distribution facilities in certain markets.

Leasing Activity

Annual leasing activity is projected to hover around 750 million sq. ft. for the foreseeable future. While lease renewals will dominate the first half of 2024, there may be an uptick in new leasing activity in the latter half of the year if economic conditions improve.

Key Demand Drivers

Three primary demand drivers will shape occupier decision-making in 2024:

• Supply Chain Resiliency: Companies will focus on strengthening their supply chains by diversifying import locations, onshoring or nearshoring manufacturing operations, and adequately staffing their distribution centers.

• E-commerce Growth: The e-commerce sector will continue its steady growth, leading retailers and suppliers to expand their warehouse and distribution space, particularly in the U.S. South.

• Population Growth: Growing population centers will drive demand for industrial spaces, especially in regions experiencing demographic growth.

Regional Highlights

Markets with well-trained, affordable, and available labor pools will be in high demand. Some of these markets include Memphis, the PA I-78/81 Corridor, Indianapolis, Louisville, the Inland Empire, and Savannah.

Sustainability Focus

With pandemic-driven demand receding, occupiers will increasingly focus on energy-saving measures for their facilities. There will be a growing demand for sustainable energy sources like solar and wind power, with commercial use of solar panels expected to grow by 13% in 2024, according to the Solar Energy Industries Association.

Additionally, there will be an increased investment in automation and artificial intelligence for order picking and inventory control. First-generation spaces equipped with these amenities will be highly sought after.

Conclusion

In summary, the U.S. industrial market is expected to stabilize in 2024, with moderate growth and a focus on sustainability and resilience. As companies adapt to evolving market conditions, those that prioritize supply chain optimization, e-commerce expansion, and sustainable practices will be well-positioned to succeed in this changing landscape.

Asheville Industrial Market

The industrial real estate landscape in Asheville, North Carolina, is experiencing notable shifts and growth, making it an area of interest for investors, businesses, and developers alike. With a vacancy rate of 5.5%, an increase of 1.5% over the past year, Asheville's industrial market is reflecting trends both nationally and locally. Here's a closer look at the current state and future prospects of Asheville's industrial sector.

Economic Resilience and Recovery

Asheville has demonstrated remarkable resilience in its economic recovery, having regained all the jobs lost during the initial months of the pandemic. The metro area experienced a significant decline, shedding nearly 35,000 jobs, or about 18% of its total labor force, in the aftermath of the pandemic's onset. Since then, total employment has surpassed pre-pandemic levels seen in February 2020.

Key sectors driving job growth in Asheville include professional and business services, leisure and hospitality, and education and health services. These industries have continued to see outsized gains compared to others in the region, contributing to the area's economic recovery.

Market Segmentation and Trends

In Asheville's industrial market, logistics space remains the largest subtype, accounting for 22.0 million SF. This is followed by 9.8 million SF of specialized space and 6.4 million SF of flex space. The combined total of 38.2 million SF places Asheville as a typically sized industrial market, offering a diverse range of industrial property types to meet varying needs.

Rent and Price Trends

Rents in Asheville's industrial market have been on an upward trajectory, currently averaging around $9.50/SF. This represents a significant 7.2% increase from a year ago and a cumulative increase of 31.3% over the past three years. Despite these increases, Asheville remains a structurally inexpensive market, with average rents well below the national average of $12.00/SF.

Sales Activity and Investment Trends

Sales activity in Asheville's industrial market has been robust, with 52 sales recorded in the past year. These sales have averaged $64/SF, with an estimated market value of $72/SF. The most frequent transactions have involved logistics space, accounting for 27 sales, which aligns with the dominant subtype in Asheville's industrial market. Over the past three years, the market has seen a total of 168 sales, amounting to approximately $376 million in transactions. This period has also seen an increase in the market cap rate to 9.0%, surpassing the trailing three-year average of 7.9%. These trends indicate growing investor interest and confidence in Asheville's industrial sector.

Economic and Demographic Trends

The Asheville market continues to be driven by the travel and leisure industry, benefiting from post-pandemic demographic trends. As consumers prioritize experiences and discretionary spending, tertiary markets like Asheville have experienced higher-than-average growth and increased demand due to the region's affordability, natural amenities, and accessibility.

The median household income in Asheville has grown by 29.2% over the past three years, outpacing national trends. Additionally, population growth in Asheville has continued to outpace national trends, driven by in-migration to the Sun Belt region. With employment growth at 2.4%, outpacing national trends, both economic and population growth are expected to remain positive in the near term, despite economic uncertainty.

Conclusion

In conclusion, Asheville's industrial market presents a mix of growth opportunities and favorable conditions for investors and businesses alike. With increasing rents, ongoing construction, robust sales activity, and positive economic and demographic indicators, Asheville's industrial sector is poised for continued growth and development. As the market continues to evolve, stakeholders should keep an eye on these trends to capitalize on emerging opportunities in this dynamic market.