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Another short-term impact companies are facing is a rising vacancy rate in the sector which currently sits at 5.8 percent as of Q1 2024 . This is a 200-basis-point increase over the same period in 2023 . Robust construction completions are a major contributor to this , but we have seen a normalization of construction starts , allowing for absorption to catch up . Cushman & Wakefield is currently forecasting vacancy to top out at 6.6 percent before dropping back to around five percent . It is notable that five percent is below the long-term historical average , so this cycle is fundamentally different than prior cycles .
An interesting shift in traditional key industrial markets is occurring with port disruptions in Baltimore after the Key Bridge collapse , the unrest in the Suez Canal , and delays at the Panama Canal – each of which requires creativity and alternate logistics channels to avoid or lessen delays and interruptions .
An analysis of construction costs for completed projects has shown that economies of scale are providing savings on a cost-persquare-foot basis . Construction costs ( exclusive of land ) for a small project ( 109,000 square feet ( sf )) is averaging $ 142 per sf reflecting a 17 percent increase year over year ; a mediumsized project ( 475,000 sf ) is averaging $ 85 per sf reflects a 2.1 percent increase year over year ; and a large project ( 900,000 sf ) is averaging $ 75 per sf yielding a 4.2 percent drop in pricing year over year .
While these averages indicate interesting trends , certain geographies saw much larger – or smaller swings – based on many of the factors identified above . Manufacturing firms have relocated industrial facilities to avoid sending large amounts of product across the ocean causing a significant increase in construction in Mexico City and Guadalajara where labor is quite competitive with available land . This enables trucking instead of shipping . A similar
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