U.S. industrial and logistics leasing activity will decline by 10% to 15% in 2023, though for the 13th consecutive year more industrial square footage will be absorbed than will be vacated, real estate services firm CBRE Group Inc. said Thursday.

Industrial vacancy rates, already at historic lows, will increase just slightly next year, CBRE said.

Nationwide vacancy rates currently sit between 3% and 4% and in several top-tier markets are well below those levels. CBRE (NYSE: CBRE) classifies industrial real estate as being both manufacturing and logistics facilities, though logistics warehouses make up the lion’s share. 

The decline in industrial leasing activity will be accompanied by a slowing in construction, as well as declines in asset values and investment volume, CBRE said. One piece of positive news is that construction costs are expected to rise by 5.4% after two consecutive years of double-digit increases, according to the forecast.

The rapid rise in interest rates throughout 2022 will increase “capitalization” rates — a measure of a property’s value in proportion to its projected cash flow — by 25 to 50 basis points next year, CBRE said. As increases in capitalization rates translate into lower returns on investment, asset values across all real estate classes will drop by 5% to 7% next year…

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