Multifamily is not the only CRE category where new construction has been slowing. Industrial has also been hitting the brakes.
Data from Yardi Matrix revealed that 358.8 million square feet of industrial space is currently under construction. That’s 1.8% of existing stock.
In 2021 and 2022, the U.S. industrial market saw “historic new supply levels," it said. During which, more than 1.1 billion square feet was delivered, the firm wrote in a February 2024 report. The amount of new space helped cool pent-up demand. But Yardi noted that the level of construction activity was “unsustainable over the long run.”
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Through the third quarter of 2024, new construction was still in process, however, the rate was turned well down from the turn-it-up-to-11 that seemed more suited to This Is Spinal Tap. In the year-to-date through October, there were 310.2 million square feet of completions, but only 69.3 million square feet came in during Q3. Had deliveries been even, each quarter would have seen 103.4 million square feet. As it was, the first quarter saw 119.3 million square feet, and the second quarter, 101.5 million square feet.
Yardi did say that a data lag could eventually mean a larger count for the third quarter, the pattern is the result of “the drop-off in starts” trend that began in late 2023 and has continued through this year. Starts in 2021 were 557.4 million square feet and in 2022, 593.2 million square feet. In comparison, 2023 saw only 314.6 million. Year-to-date through 2024 Q3, the amount was only 184.4 million.
The national percentage of existing stock under construction was 1.8%. Of the metro areas that Yardi Matrix examined, here are the top ten in the percentage of stock under construction: Phoenix (6.7%), Kansas City (4%), Memphis (3.5%), Philadelphia (2.8%), Columbus (2.6%), Denver (2.5%), Charlotte (1.9%), Houston (1.8%), Dallas (1.7%), and Atlanta (1.6%).
And the bottom ten: Bridgeport (0.2%), Orange County (0.5%), Cincinnati (0.5%), Chicago (0.6%), Twin Cities (0.6%), Tampa (0.7%), Los Angeles (0.7%), Cleveland (0.7%), Seattle (0.8%), and Boston (0.8%).
For some comparisons in context, Yardi Matrix said that Dallas in the year-to-date through October had 13.3 million square feet in starts. Between 2021 and 2023, the annual average was 42.6 million. Phoenix had previously averaged 32.5 million a year in the previous three years; it’s currently at 10.7% of that amount so far in 2024.
The Inland Empire took a big hit in 2023 when only seven million square feet started. In 2021 and 2022, the average was 57 million square feet.
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