VACANCIES, CONSTRUCTION COSTS, INTEREST RATES, AND A GRID-LOCKED MARKET: THEMES OF 2023

One year ago, industrial land was selling to developers like hotcakes. Today those developers are struggling to make development pencil out. While lease rates have increased and vacancies are at an all-time low, the cost of building has also increased. Some developers have paused speculative projects. This stagnant supply and strong demand dynamic are creating challenges for tenants, brokers, and developers. Transaction volumes are considerably less than what they were one year ago as tenants and buyers can’t find available space and interest rates have grid-locked the investment side of the market.

A separate but related concern throughout the market is the increase in NNN expenses. Insurance rates are increasing across the board, taxes are increasing, and maintenance costs are increasing. Persistent labor challenges are also driving the costs of..............

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