The surge in industrial developments over the past two years has slowed considerably. Developers completed over 1.5 billion square feet of industrial projects in the U.S. during 2022 and 2023, but many of these were finished without tenants, pushing the vacancy rate from 3.8% to 6.4%. Now, early 2024 data shows a 30% drop in completed projects, signaling a significant slowdown in new developments.
Interest Rates and Their Impact
Higher interest rates have played a crucial role in curbing new industrial construction starts. By the fall of 2023, industrial construction starts had plummeted to 10-year lows, with projections indicating a continued decline through mid-2025. This decrease in new projects is a direct response to the financial environment, which affects developers' ability to finance new constructions.
Important Numbers:
Construction start decline: Down 40% in early 2023, further 60% drop in the following 12 months.
Interest rate impact: Higher costs limit new development financing.
Implications for San Diego's Market
San Diego’s industrial real estate market, while influenced by national trends, has its unique dynamics. The slowdown in new industrial projects could lead to a tighter market locally, especially if tenant demand remains steady or improves.
Local Market Insights:
Tightening Supply: Fewer new completions could reduce available industrial spaces.
Investment Potential: Limited new supply may increase the value of existing properties.
Tenant Opportunities: Businesses may need to act quickly to secure desirable spaces.
The Ocean Company: Your Partner in San Diego Real Estate
Navigating these changes requires expert knowledge and strategic planning. At The Ocean Company, we offer specialized services in tenant representation and investment sales to help you succeed in San Diego’s competitive market. Our team is dedicated to providing personalized solutions tailored to your specific needs.
What We Offer:
Customized Search: Finding industrial spaces that match your business requirements.
Strategic Investment Advice: Helping you capitalize on market opportunities.
Local Market Expertise: Providing up-to-date insights and trends.
Interested in making the most of the current market conditions? Reach out to The Ocean Company today and discover how we can assist you in achieving your real estate goals in San Diego.