2024 Recap & 2025 Outlook
The Davis Industrial Report
2024 Industrial Market Recap
The U.S. industrial real estate sector stabilized in 2024 after years of rapid growth. Vacancy rates increased to 7.5% by November, driven by 1.1 billion SF of new supply delivered in 2022-23 and 330.7 million SF in 2024. However, construction starts declined to 208.7 million SF, signaling a slowdown in new developments.
Industrial transactions totaled $54.6 billion (up 2.7% YoY), with properties trading at $128/SF.
Rising interest rates and borrowing costs softened demand, increasing vacancy to 6.8% from 4.9% in 2023.
Despite cooling, leasing activity remained strong, nearing 2023 levels.
2025 Industrial Market Outlook
The market will return to pre-pandemic demand drivers, with occupiers focusing on:
✅ Warehouse efficiency & automation
✅ Supply chain resiliency
✅ ESG-compliant facilities
✅ Long-term leasing strategies
With construction deliveries tapering off midyear, the vacancy rate should stabilize at 5.0%, tightening slightly in late 2025. Leasing activity is expected to remain steady at ~750M SF annually, creating a tenant-friendly market in early 2025 before competition increases.
Post-Election Industrial Market Expectations
The 2025 industrial market will be influenced by new economic policies, including:
🏛 Corporate tax changes – Possible shifts affecting investor confidence
🚛 Infrastructure investments – Potential funding for logistics and warehousing
🌎 Trade policies & tariffs – Reshoring may accelerate industrial demand
🔋 Renewable energy incentives – Expansion of EV and battery plants
Early in 2025, some businesses may delay decisions, but activity should ramp up as policies become clearer.
Key Areas to Watch in 2025
📉 Interest Rates & Capital Markets – Persistent volatility may slow new development but create buying opportunities.
🚢 Supply Chain Trends – Nearshoring & automation will shape leasing decisions, boosting last-mile logistics demand.
🌿 ESG Initiatives – Companies will seek energy-efficient properties to meet sustainability goals and cut costs.
🏭 Emerging Submarkets – Expect growth in affordable, well-located secondary markets near major logistics hubs.
📜 Legislative Impact – Watch for federal infrastructure bills, trade agreements, and tax incentives affecting industrial growth.
