Why is the U.S. industrial vacancy rate rising? Research from Colliers suggests a simple reason: The number of new industrial facilities delivered by developers continues to outpace the demand from tenants for new warehouse and manufacturing space.

That’s the takeaway from Colliers’ first-quarter national U.S. industrial report released last month. But there is good news in the report, too. Colliers says that the vacancy increases should stop as new industrial construction slows, something that is already happening.

In its report, Colliers said that industrial construction completions outstripped tenant demand for the seventh quarter in a row in the first quarter of this year. That pushed the U.S. average industrial vacancy rate up 50 basis points to 6.1% during the quarter, the highest that figure has been since early 2015.

Industrial vacancy rates increased in 61 of the 77 markets tracked by Colliers between January and March.

In another sign that the industrial market is slowing, Colliers reported that net industrial absorption during the first quarter came in at only 28 million square feet. That’s the lowest this figure has been in more than a decade and is 65% lower than the 81 million square feet absorbed in the first quarter of 2023.

Developers delivered more than 120 million square feet of new industrial space during the first quarter. That is down from more than 154 million square feet in the fourth quarter of 2023 and 140 million square feet in the first quarter of 2023.

The more interesting number, though, is the amount of industrial space under construction. Colliers said that developers had more than 384 million square feet of new industrial properties under construction in the first quarter. That’s a large number, but it’s lower than the more than 447 million square feet under construction in the fourth quarter of last year and significantly less than the 690 million square feet being built in the first quarter of 2023.

Those construction numbers are a sign that developers are pulling back in the amount of new industrial space that they are adding across the country. As new industrial construction slows, tenants might struggle to find the space they need. That should increase demand and result in vacancy rates in this sector dropping again.