•  National industrial vacancy rose 40 bps to 5.7% YoY; leasing volume down 14%.

• Average cap rates were stable at 5.1%, with a 10-bps range across major logistics markets.

• New construction starts fell 23% YoY amid credit tightening.

• Net asking rents edged up 2.8% YoY, lagging the 5-year average.

• Institutional buyers accounted for 67% of Q2 transaction volume.

Warehouse capital is navigating turbulence, as slowing absorption and persistent new supply force discipline across dealmaking, underwriting, and lending. Vacancy rose nationwide in Q2, putting upward pressure on incentives, but yields remained tightly anchored. This signals bifurcation: pricing resilience in prime logistics, caution elsewhere. Capital remains selective, and operational performance is the focal point for risk evaluation.

This quarter, U.S. industrial leasing volume fell 14% YoY, the sharpest drop since 2020. Yet national net asking rents ticked up modestly—averaging $8.36/sf, a 2.8% increase. According to a Texas-based asset manager, “Renewals are competitive; new leasing is work.” The slowdown in rent growth reflects increased incentives, especially for properties outside key fulfillment corridors. On balance, rental pricing is more disciplined as tenants leverage broader options.

In a rare reversal, new construction starts dropped 23% YoY, driven by both lender caution and developers’ focus on pre-leased commitments. Deliveries, however, continued with over 140 million sf completed in H1. This surge has nudged overall vacancy from 5.3% to 5.7%, a 40-bps rise. Loan spreads for speculative starts widened by 25–40 bps in core markets. For now, liquidity is most accessible for projects demonstrating clear absorption.

Despite choppy leasing, average industrial cap rates have held at 5.1%, with spreads between gateway and secondary markets narrowing. Institutional buyers—especially pension vehicles—were behind 67% of Q2’s $14.8B in closed volume. Still, average pricing per square foot softened in two of three major regions. By contrast, distress remains limited, with loan delinquency holding below 1.4%. Ultimately, capital is prioritizing stabilized, internally managed assets.

Beneath the headline figures, disparities loom. Sunbelt metros saw vacancy hit 6.2%, well above the Midwest’s 4.8%. Coastal infill markets like Northern New Jersey and Los Angeles exhibited stronger rent growth (4.5–5.1% YoY) as supply remains constrained. In practice, submarket performance increasingly shapes underwriting in both acquisition and refinancing. Investors are recalibrating return thresholds in line with operational divergence.

Expect the rest of 2024 to hinge on two factors: credit access and absorption pace. Should interest rates ease or tenant demand stabilize, capital may re-enter development with renewed confidence, but any persistent lag in leasing will see incentives and concessions expand further. Regional risk management will be crucial, as oversupplied corridors require strategic patience. For sophisticated allocators, disciplined capital deployment—anchored in operational diligence—will drive risk-adjusted returns.