Welcome back to another blog post. Today we are taking a look at the current state of the industrial market.

The industrial space is experiencing a small spring surge in leases, which seems odd. Why are companies signing new leases, with probably higher rents, when the consumer is supposed to be in rough shape? Inflation is still eating away at consumers ability to spend and higher interest rates make this situation only tougher. Initially, one would think that if consumers are not spending then industrial tenants need to be weary about their consumer demand and not spend more.

Now, this is the situation, but there is an answer. The answer could be that companies are starting to see a bottoming in consumer pain and are wanting to move to newer/nicer spaces before leasing demand jumps. It seems like it is a way of companies posturing for what is to come i.e. when the consumer is in better shape.

Now, let’s be clear, net absorption of industrial spaces has not increased. It has slowed to the lowest levels in over 10 years. This means that tenants are just moving out of one space and into another, not necessarily that more total space is being leased up.

Quite interesting.

So, if huge companies like Amazon, Walmart, Ace Hardware, and others are actively signing new leases it might be a good signal for the consumer. And/or these huge companies are anticipating an increase in demand for industrial space. Something that think about.

Ok, that’s it for today.

Thank you,

The Nest Journal

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