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When most people think of a wall, they often think of the Berlin Wall, the Great Wall of China and even Pink Floyd’s album “The Wall.” But today, we’re writing about a different wall: the great Wall of warehouse space that is and has been coming to U.S. industrial markets for the last several years. Like a tsunami of space, this Wall has increased the vacancy for U.S. warehouse/logistics space from 3.9% in the second quarter of 2022 to 7.7% at the end of the third quarter of 2024.

Further exacerbating this increase in vacancy has been the fact that net new leasing or absorption of warehouse space is now at the lowest annual level since 2012 and less than optimistic predictions have been made that the vacancy rate for the U.S. industrial warehouse logistics market may peak as high as 9.4% in the fourth quarter of 2025. That said, this Wall of new space will finish deliveries by late 2025 and thereafter, with very little new space in the pipeline and new starts at a ten (10) year low, vacancy rates will quickly begin to decline and rental rates will as well.

In short, this oversupply of space and significant reduction in leasing has created a short term opportunity for Tenants to lease space at very attractive rates. For perspective, experts consider 6% to be a normal vacancy rate for industrial space with a rate of less than 4% being considered a very strong Landlord market and a vacancy rate of 10% or more being considered a very strong Tenant market. For perspective, the last time the U.S. Industrial – logistics markets had a vacancy rate of 10% or more was early 2011.

Between the fourth quarter of 2024 and second quarter of 2025 will great and opportunistic times for Tenants to finalize leases. Thereafter, with very little new supply of warehouse space coming to market, vacancy rates will decrease, rental rates will increase and the balance of power between Landlords and Tenants will soon shift back to the Landlords.