During the first half of 2019, an impressive 125 million square feet of industrial product was completed in the U.S. Despite this large amount of development, the overall vacancy rate dropped to 4.9%. The vacancy rate dropped because of a plethora of leasing and user sales activity in newly constructed product. Activity for the product completed the first half of 2019 remains robust and because of this, only 35.9% of this product is vacant. Only 29% of the product completed the first half of 2019 were build-to-suits (BTS), with 89 million square feet (71% of total construction) being speculative (SPEC). Of this speculative product, 44 million square feet (or 49%) has already been taken. 45 million square feet of newly constructed SPEC product completed in the first half of 2019 remains vacant — this accounts for only 5.8% of the total existing vacant product on the market today.
U.S. seaport and inland port markets continue to post the most demand for newly constructed product evidenced by robust activity. The top five markets for new construction vacancy include Northern New Jersey (4.8%), Savannah (6.9%), Kansas City (8%), Cleveland (9.7%) and Washington, D.C. (10.2%).
With a majority of the product completed in the first half of the year already occupied and overall vacancy rates at all-time lows, a robust amount of new development is warranted to keep up with projected demand. Occupiers will continue to need new warehouse facilities with modern amenities to service the growing number of people purchasing goods online. The good news for the U.S. industrial market is a record 306 million square feet is now under construction and early indicators are showing that this product is already experiencing significant demand. Because of this, look for demand to remain strong but vacancy rates to remain low for the foreseeable future.