In 2023, industrial groundbreakings were down approximately 60% compared to 2021 / 2022 levels. The decline in development activity can be directly attributed to a more challenging lending environment and underwriting standards that no longer align with the current market dynamics. Factors contributing to this shift include flattened rental rates, increased construction costs, and higher cap rates. The lower development activity could be viewed as a positive by giving the market the opportunity to recover from 135 million square feet of industrial deliveries over the past five years.

As the year 2024 unfolds, the industrial market is poised for both uncertainty and opportunity. Despite facing challenges, positive trends are evident. The anticipated decrease in interest rates during the second half of 2024 could potentially stimulate renewed development starts. Additionally, owner-occupants looking to purchase buildings might offset the softening leasing market. If these trends persist and keep vacancies low, new industrial developments may break ground in the second half of 2024.