The U.S. industrial vacancy rate increased by 40 basis points in the second quarter, reaching 6.1%, the highest level in nine years, according to the latest research from Cushman & Wakefield.

Despite this rise in vacancy, though, industrial absorption doubled in the second quarter, with 46.3 million square feet of space taken off the market, a sign that even with a higher vacancy rate, the U.S. industrial sector still boasts strong market fundamentals.

Jason Price, Americas Head of Logistics & Industrial Research at Cushman & Wakefield, said that while no one likes to see higher vacancy rates, the vacancy rate in the industrial sector remains well below the 10-year pre-pandemic average of 7%.

“Despite the rise in vacancy, industrial markets are showing increasing levels of demand after a sluggish first quarter,” Price said. “New supply is leveling off as developers wait for the market to catch up. We expect that vacancy will peak early next year at 6.7% as the markets stabilize.”

Asking rent growth continued to cool, with nationwide rents rising 3.7% year-over-year, driven by the Northeast (+5.3%) and South (+2.9%) regions.

Quarterly leasing activity was 137.2 million square feet, down 2.8% from the 141.1 million square feet reported in the first quarter. However, the second quarter total was 11.2% higher than the 10-year pre-pandemic quarterly average of 126.9 million square feet.

The U.S. registered 278.4 million square feet of new deal activity through midyear, putting the market on pace to surpass the 500-million-square-foot mark for the 10th straight year. These normalized levels of deal volume are partially due to moderating consumer demand, longer transaction times and, in some cases, decreasing average deal sizes.

Seven markets recorded more than 10 million square feet of leasing activity through midyear, led by the Inland Empire (22.1 million square feet), Dallas/Ft. Worth (19.2 million square feet) and Houston (16.7 million square feet).

New construction deliveries remained robust, with 121.1 million square feet of new product completed in the second quarter, on par with the previous quarter. This pushed the year-to-date total to 239.6 million square feet, the second-highest midyear total on record, 84% of which was speculative. The South region continues to account for the highest share of new deliveries (48.3%), with markets such as Atlanta, Dallas/Ft. Worth, Savannah, and Houston delivering large amounts of new industrial space.

Construction starts remained relatively muted in Q2, although up slightly compared to the first quarter. The under-construction pipeline fell to its lowest level (343.3 million square feet) since mid-2020 (334.8 million square feet). The pipeline has declined by 14.4% since Q1 and is down 46% from a year ago. The South (-118%) and Midwest (-99%) regions posted the sharpest pipeline declines during the same period.

Of the national under-construction pipeline total, speculative product makes up 67.7%, down from 71.4% in the first quarter. This share is likely to decrease further in the second half of 2024 as speculative warehouse facilities continue to deliver at a healthy rate and build-to-suit manufacturing facilities remain under development due to their longer construction timelines.

“Industrial markets continue to show strength and resilience, even as they adjust and level-set following the pandemic boom,” said Price. “As development slows to meet demand and absorption catches up to supply, we will see the markets find balance.”

Cushman & Wakefield arranged a 211,087-square-foot office lease renewal for Santander Consumer USA at 1601 Elm St., also known as Santander Tower, in Dallas.

This marks the largest office lease renewal in Dallas this year and largest in downtown Dallas in the past five years.

As part of the lease renewal, Santander will retain their current naming rights to the building and continue to utilize the space as their headquarters and executive offices. 

Robbie Baty and Travis Boothe of Cushman & Wakefield represented Santander Consumer USA in the lease renewal negotiations. Landlord, Pacific Elm Properties, was represented by Sara Terry and Reegan Busby of the Pacific Elm Properties in-house leasing team.

Santander Tower is 50-story office building spanning 1,402,623 square feet in the heart of Downtown Dallas, boasting one of the most diverse set of amenities of any office building in Dallas. The building, which underwent a transformative renovation in 2017 and 2023, includes two ground-floor restaurants (Fond and Parterre), the Tower Club (a private dining club on the 48^th floor), Mint House Hotel (a 60 room boutique hotel on the 49^th and 50^th floors), a high-end fitness facility, and the Peridot Residences (290 unit luxury apartments on 14 floors).

Adolfson & Peterson Construction completed construction on the five-story, 158,250-square-foot Potter County District Courts Building in Amarillo, Texas.

Designed by HOK Group Inc., the new courthouse includes courtrooms, a jury assembly, county offices, courtroom in-custody holding and records storage. Additional amenities feature security enhancements including separate sheriff’s access with a vehicle sally port for security and safety, as well as separate access for judges and other elected officials.

Construction for the Potter County District Courts Building kicked off in March 2021. The new Courthouse is located across the street from the former District Courts Building in downtown Amarillo.

The previous District Courts Building was constructed in 1985 and the replacement building will help Potter County save on recent increasing maintenance and repair costs. Addressing the aging building was a top area of focus in the County’s 2018 Strategic Plan.

AP has a long history of providing construction management services to municipalities and governmental entities throughout Texas. Current and past projects include the City of Dallas’ North Dallas Government Center, the Marq for the City of Southlake, multiple facilities for the Town of Little Elm, Rockwall County Jail, and the Garland Audubon Recreation Center. Nationally, AP has completed more than 2.2 million square feet of construction work for municipalities and governmental entities since 2016.

Colliers brokered a lease of10,355 square feet for AA Gymnastics Academy at Baywood Plaza Shopping Center at 3226 FM 528 in Friendswood, Texas.

The landlord, MDDS Properties, was represented by Kelly Hutchinson of Colliers.  

The property is within Houston’s Southeast Outlier retail submarket, which contains 14.7 million square feet of retail inventory and is currently 96.2% occupied. The sector recorded 72,219 square feet of net absorption and 126,022 square feet of leasing activity during the first half of 2024.

Need further proof that demand in the once red-hot U.S. industrial market has slowed? In its most recent market snapshot, Savills reports that the country’s industrial sector saw 45.5 million square feet of absorption in the second quarter. That’s down nearly 30 million square feet from a year ago.

According to Savills’ numbers, the United States saw 74.4 million square feet of industrial absorption in the second quarter last year, a far more robust number than the 45.5 million square feet it saw in the second of 2024.

Other numbers show industrial’s slowdown, too. Savills reported 410.5 million square feet of new industrial properties under construction in the second quarter of this year. That, too, is down significantly from the same quarter a year ago, when 707.3 million square feet of industrial properties was under construction.

Then there’s the sector’s vacancy rate. According to Savills, the U.S. industrial sector’s vacancy rate rose to 7.1% in the second quarter, up from 4.7% a year ago.

Deliveries also fell, though by a smaller amount. Savills said that the United States saw 113.8 million square feet of new industrial product hit the market in the second quarter, down from 154.1 million square feed during the same quarter 12 months ago.

The only number that didn’t drop? Asking rental rates. According to Savills, the average asking rental rate stood at $9.53 a square foot in the second quarter. That is up from an average of $9.22 a year ago.

Savills also reported that a record 185.3 million square feet of sublease space is on the market for lease. That is up 58% from last year and still rising.

Versal closed the sale of Affordable Storage in Clute, Texas.

Affordable Storage is six miles northwest of Freeport and 55 miles south of Houston. The Class-A property has 440 units totaling 46,785 square feet.

Bill Bellomy, Michael Johnson, Logan Foster and Hugh Horne of Versal represented Fab Legacy LLC, the New Hampshire-based seller. The team also procured the Miami-based buyer, LAGO Properties, LLC.