Industrial has continued to hold its own, yet record-fast spec deliveries are equaling a vacancy rate that keeps on climbing, according to Colliers’ 22Q4 Construction Review. But just how long is so much valuable space predicted to remain on the market?
Developers delivered 6.5 million square feet of new spec product during Q3 2022 then repeated that total during Q4. Over the course of 2022, 64 spec buildings—20.8 million square feet—were delivered for a 35% increase over the previous record of 15.4 million square feet of spec deliveries recorded in 2019.
Tenants continued to lease space quickly in recently completed spec buildings, as well as buildings still under construction during each quarter of the year, but not fast enough to exceed the pace of deliveries during the latter half of 2022, based on the report, causing the first increase to the vacancy rate in recently completed spec product since 2019.
In fact, developers delivered more spec space in 2022 than other year in the market’s history—a whopping 20.8 million square feet. While 56% of the space delivered in 2022 remained vacant at the end of the year, another 95 million square feet of spec product was delivered between 2013 and 2021, which was only 2.7% vacant at the end of the year, according to Colliers.
But patience is all it will take to fill the buildings. Despite the massive uptick in spec development witnessed during 2022, strong demand is predicted to result in most of that space being leased by the middle of 2023.
Developers were underway on 80 new spec buildings (30.2 million square feet) at the end of 2022, setting another new record for the most spec space under construction at one time in the market’s history. Only 10% of that space was pre-leased at the end of the year, but Colliers said strong demand will translate to these buildings as well, especially once a majority of the product built in 2022 reaches a lease rate of 100%.
