The U.S. industrial market saw a dip in leasing activity and an increase in vacancy rates in the first quarter of 2024. But it also saw early signs of a recovery.

That’s the takeaway from the State of the U.S. Industrial Market first-quarter report released in May by Savills.

Savills reported that the U.S. industrial market is shifting from a historically tight market to one that is more balanced. That can be seen in the market’s rising vacancy rates.

According to Savills, the U.S. industrial market’s vacancy rate rose 240 basis points in the first quarter of this year when compared to the first three months of 2023. The vacancy rate for this sector hit 6.7% as of the end of the first quarter.

Demand for industrial space by tenants is cooling, too. Savills reported that industrial absorption dropped to 26 million square feet in the first quarter of the year. That’s the lowest amount of absorption in the first quarter in eight years.

Just look at the first quarter last year: Savills reported that the U.S. industrial market saw 91.4 million square feet of net absorption during the first three months a year ago.

Industrial construction activity remained high in the first quarter, with 462.1 million square feet of new industrial space under construction. But this activity is slowing, too, and is down a significant 44% from its peak in 2022.

During the first quarter of last year, the industrial sector saw a far higher 782.1 million square feet under construction.

Savills reported, too, that industrial deliveries fell to 122.4 million square feet in the first quarter. That is down, too, from the 163.1 million square feet of industrial space that was delivered during the first three months of 2023.

One number that is moving in the right direction? Asking rental rates. Savills reported that the average asking rental rate for an industrial property in the United States rose to $9.47 a square foot in the first quarter. That is up from an average of $8.67 a square foot last year during the first quarter.