{"id":1004561296,"date":"2021-12-21T02:18:21","date_gmt":"2021-12-21T10:18:21","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004561296"},"modified":"2022-12-09T02:39:54","modified_gmt":"2022-12-09T10:39:54","slug":"what-to-expect-from-the-industrial-sector-in-2022","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/what-to-expect-from-the-industrial-sector-in-2022\/","title":{"rendered":"What to Expect From the Industrial Sector in 2022"},"content":{"rendered":"
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Image by Adrian Sulyok via Unsplash<\/p><\/div>\n

A massive race for space<\/a>. That\u2019s the most fitting way to describe the booming industrial market we\u2019ve seen from coast to coast since the onset of the health crisis. Throughout 2021, strong e-commerce and retail sales\u2014combined with supply chain challenges\u2014fueled demand for space in the industrial sector, especially for warehouse and distribution centers.<\/p>\n

And demand continues to outpace supply. The U.S. market absorbed a total of 140.7 million square feet in the third quarter, while overall absorption is predicted to reach 507.3 million square feet of space in 2021. Meanwhile, the national vacancy rate stood at 4.1 percent at the end of the third quarter, down 110 basis points year-over-year, according to Cushman & Wakefield research.<\/p>\n

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READ ALSO: <\/strong>What\u2019s Ahead for Office in 2022<\/a><\/p>\n

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With supply chain bottlenecks and rising transportation costs, there\u2019s an increased push toward building resilience. As a result, companies are switching from a just-in-time inventory<\/a> to a just-in-case supply chain strategy, pushing up the need for space.<\/p>\n

At the same time, occupiers are also racing to improve their last-mile strategies by being closer to the end consumer. This approach, however, is predicted to disproportionately benefit gateway markets as they are the first step on the consumption end of supply chains, according to a Prologis report. Port markets generally record the tightest vacancy rates, with the Inland Empire having only 1 percent of vacant space at the end of the third quarter\u2014the lowest in the country, according to CommercialEdge data. In other markets, such as Los Angeles and New Jersey, vacancy clocked in at 2.9 percent and 3.4 percent.<\/p>\n

Indeed, location matters more than ever when it comes to logistics and distribution, and instead of real estate costs, it\u2019s the speed and cost of transportation that drive decision making, Gregg Healy, executive vice president & head of industrial services at Savills, told Commercial Property Executive. <\/em><\/p>\n

As higher transportation costs countervail low rents, secondary and tertiary industrial markets won\u2019t benefit as much from this shift in supply chain strategies. However, Prologis predicts that the just-in-case inventory strategy will require around 800 million square feet of logistics space in the near term. Primary, gateway locations might not be able to support this growth, considering the high barriers these markets pose when it comes to new development. Therefore, this limited opportunity for ground-up projects might push some growth into neighboring locations.<\/p>\n

The rise of on-demand warehousing<\/h2>\n

Although the logistics sector is working toward becoming resilient against supply chain disruptions, this is not yet reflected in leasing practices across the board, as companies focus on immediate inventory challenges, Prologis reported. Forced to reimagine how they think about and utilize space, businesses have often pivoted to on-demand warehousing to secure space to suit their needs and timelines, Chunker CEO Brad Wright told CPE<\/em>.<\/p>\n

Wright believes that despite the skyrocketing demand for industrial space, there\u2019s still a significant amount of vacant, underutilized space in the market. \u201cThese are essentially hidden gems <\/a>that can provide a lifeline to businesses in need of space quickly and on flexible terms, without the hassle and expense of long-term leases,\u201d Wright said. <\/em><\/p>\n

Short-term warehouse solutions can, without a doubt, fill a gap in the market, especially when businesses are trying to deal with the immediate effects of the pandemic and supply chain crisis. However, the need for new space will remain a challenge as businesses work out their long-term strategies.<\/p>\n

What’s ahead?<\/h2>\n
\"\"<\/a>

Image by frank mckenna via Unsplash<\/p><\/div>\n

Next year will be as intense as 2021. E-commerce will continue to drive growth, but there will be an uptick in demand for manufacturing facilities as well, leading to a continued shortage of industrial sites across all major markets, as the types of facilities in need versus the ones available is still not in balance, according to Healy.<\/p>\n

Additionally, occupiers will continue to look for Class A space in premium locations.<\/p>\n

\u201cThere will be a continued flight to quality across the different buildings, as well as many users will revisit their current locations to optimize transportation resources, especially as transportation costs soar,\u201d Healy added.<\/p>\n

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READ ALSO: <\/strong>Navigating California\u2019s Mighty Industrial Market<\/a><\/p>\n

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Despite material and labor shortages and rising constructions costs, Cushman & Wakefield forecasts that deliveries will pick up significantly in the next two years, restoring some balance between supply and demand.<\/p>\n

\u201cNew deliveries are projected to reach 932 million square feet from 2022 to 2023,\u201d according to Cushman & Wakefield. Nonetheless, the vacancy rate will remain low\u2014170 basis points below its 10-year average between 2012 and 2021 of 5.8 percent.<\/p>\n

On the investment side, appetite is expected to remain high through 2022, following record sales <\/a>in 2021. According to Colliers, industrial transactions totaled $94.8 billion in the first three quarters of the year\u2014the highest number ever recorded compared to the same period in previous years. Cap rate compression should also continue next year, with 3 percent and lower deals becoming more frequent.<\/p>\n

Despite a record-setting year and the positive outlook, the persistent backlog at some of the country\u2019s largest seaports, labor shortages impacting every link in the supply chain and the lack of available land will continue to pressure the industrial sector in the coming year, Colliers noted. Nonetheless, industrial fundamentals are expected to stay robust in the next several years.<\/p>\n","protected":false},"excerpt":{"rendered":"

In the second installment of our outlook series, we assess what shaped the market in 2021 and where it\u2019s heading now.<\/p>\n","protected":false},"author":871,"featured_media":1004559250,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21748,23891,51037],"tags":[50647,35498,32799,51513,32956,34107],"class_list":["post-1004561296","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industrial","category-national","category-trends","tag-keypredictions","tag-colliers","tag-cushman-wakefield","tag-outlook-2022","tag-prologis","tag-savills"],"acf":[],"yoast_head":"\nWhat to Expect From the Industrial Sector in 2022 - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-from-the-industrial-sector-in-2022\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What to Expect From the Industrial Sector in 2022\" \/>\n<meta property=\"og:description\" content=\"In the second installment of our outlook series, we assess what shaped the market in 2021 and where it\u2019s heading now.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-from-the-industrial-sector-in-2022\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2021-12-21T10:18:21+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-09T10:39:54+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2021\/11\/the-2022-report-image-CPE.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"930\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Evelyn Jozsa\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-from-the-industrial-sector-in-2022\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/what-to-expect-from-the-industrial-sector-in-2022\/\",\"name\":\"What to Expect From the Industrial Sector in 2022 - 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