Record Amount of Sublease Space<\/h2>\n\n\n\n
Simultaneously, from 2023 and rising into 2024, a glut of industrial sublease space flooded the market as consumers resumed their pre-Covid purchasing behavior. In turn, ecommerce companies began reducing their footprint, and other companies started rationalizing their Covid expansions. Everyone is talking about how U.S. corporations have flooded the U.S. metro office markets with 235M SF of sublease space as employees have gone remote or hybrid. At the same time, for different reasons, U.S. industrial companies have dumped 231M SF of industrial space on the market for sublease, a high never seen before in commercial real estate history. In the U.S. today, there\u2019s as much industrial space for sublease as there is office space\u2014let that sink in!<\/p>\n\n\n\n
Availability Rates Back to Pre-Covid Levels\u2014Higher in Many Cases<\/h2>\n\n\n\n
Since 2023, industrial companies have slowed down their growth, with many putting the brakes on their expansions. The bottom line is that the combined effect of new construction and sublease supply, plus a decline in demand, have resulted in availability rates in most major metro areas returning to, or way above in many cases, their pre-Covid levels. With the exceptions of Houston and Chicago, every other major metro area reported on is 30% to 100% higher than the pre-Covid availability. The availability rates pre-Covid as compared to today are as follows in this graph, and most markets in full reversal.<\/p>\n\n\n\n <\/p>\n\n\n\n The best news for business owners and management teams is that companies looking to lease industrial space in most U.S. markets, of any size, have more choices than they have had in years. The supply of large buildings existing and under construction over 200,000 SF for bigger tenants is at a glut condition in most markets, with 134 options the Southern California Inland Empire, 166 in Dallas-Fort Worth metro and 54 in Houston metro.<\/p>\n\n\n\n One would think that with pre-Covid availability rates back, business owners signing leases would also see the return of pre-Covid pricing\u2026 but that hasn\u2019t happened. The first reason is that commercial real estate markets are very sticky and have little short-term volatility, so price declines lag downturns. Secondly, landlords work collectively to hold the line on prices, anchoring off of each other, and backstopped by the brokerage community that represents these owners in supporting the pricing these landlords are used to achieving. Last, given there is no transparency in commercial leases, landlords and their brokers maintain the historic asking prices, where business owners and management teams are at an information, leverage and representation deficit. A tenant signing a renewal at 5% off asking might feel like they got a good deal, while we are negotiating leases with that same landlord that are 15% off, with loads of free rent and large tenant improvement allowances\u2026 and landlords aren\u2019t giving deals to tenants unless someone pushes them to do so.<\/p>\n\n\n\n Market statistics provided by CoStar.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" While you cannot open a business periodical without reading an article about the meltdown of office space throughout the United States, which we forecasted would occur back in the Summer of 2020, no one is talking about the slide of industrial real estate nationally\u2026 until now\u2026 and as a business owner or executive running a manufacturing, research or distribution company, there\u2019s a lot of good news on the horizon for you.<\/p>\n","protected":false},"author":94,"featured_media":29549,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[1056,1032],"tags":[],"publication":[],"video_type":[],"coauthors":[1126],"class_list":["post-29548","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-hm-blog","category-market-reports"],"acf":[],"yoast_head":"\n![\"Industrial](\"https:\/\/hughesmarino.com\/east-bay\/wp-content\/uploads\/sites\/16\/Industrial-Market-Report-Fall-2024-Hughes-Marino.png\" "\\"Industrial")
<\/figure>\n\n\n\nMore Options Than Ever<\/h2>\n\n\n\n
\u2026But Rental Rates Still Stuck in the Past<\/h3>\n\n\n\n