NAIOP Industrial Space Forecast: Absorption Rates are Off the Peak, But Healthy

Download the report:

August 31, 2023 | WASHINGTON, D.C.

Net absorption (the amount of space occupied minus the amount of space vacated) of industrial real estate will average 52.6 million square feet over the next two years – a healthy rate, though lower than the peak amounts notched during the last two years. This is according to the newest Industrial Space Demand Forecast, released today by the NAIOP Research Foundation.

The report’s authors, Hany Guirguis, PhD, Professor, Economics and Finance, Manhattan College, and Michael J. Seiler, DBA, J.E. Zollinger Professor of Real Estate & Finance, College of William & Mary, observed key trends affecting the industrial market:

  • A slowdown in international trade and a cooling economy are expected to limit demand for industrial real estate over the next two years.
  • Higher interest rates, tighter lending standards and cooling demand are slowing the pace of construction starts and transactions.
  • Supply and demand levels for industrial space are experiencing a slower pace of growth that is more aligned with pre-pandemic trends.

Total net absorption for the second half of 2023 is forecast to be approximately 104 million square feet with full-year absorption in 2024 forecast to be around 205 million square feet.

“The national vacancy rate stands at a historically healthy 3.7%, though vacancies vary greatly between different geographic markets,” according to the report. “Port markets on both the East and West Coasts have the lowest vacancy rates, with markets in the Midwest having slightly higher rates. Average net asking rents are up 9.9% year-over-year.”

Vacancy rates have increased slightly alongside rent growth, reflecting the delivery of new, high-quality industrial space that can command higher rents. These new deliveries have outstripped absorption and resulted in an increase in vacancies.

The report notes that the economy grew at an annualized rate of 2.4% in the second quarter of 2023, though the Fed will likely maintain a high interest rate environment.

“We are pleased that the industrial real estate market continues to thrive,” said Marc Selvitelli, CAE, president and CEO of NAIOP. “The healthy environment in this sector is leading to innovations such as new facilities for cold storage, multistory warehouses powered by emerging technologies, and improved wellness features for workers. All these forces will continue to drive growth in this sector.”

Download the full NAIOP Industrial Space Demand Forecast, at

# # #

About NAIOP: NAIOP, the Commercial Real Estate Development Association is the leading organization for developers, owners, investors and related professionals in office, industrial, retail, and mixed-use real estate. NAIOP provides unparalleled industry networking and education and advocates for effective legislation on behalf of our members. NAIOP advances responsible, sustainable development that creates jobs and benefits the communities in which our members work and live. For more information, visit

NAIOP Contact:
Kathryn Hamilton, NAIOP vice president for marketing and communications
703-904-7100, ext. 165

David Harrison
Harrison Communications