Industrial property demand projected to cool
U.S. industrial space demand has tapered off in recent quarters after a pandemic-fueled surge in warehousing and e-commerce distribution. That slowdown is expected to continue in the first half of 2025 before demand picks up in the second half, according to NAIOP.
The outlook calls for net industrial space absorption — tenant move-ins minus move-outs — to reach 52.2 million square feet in the first half of this year, accelerating to 156.4 million square feet in the second half. Net absorption posted at 96.9 million square feet in the second half of 2024, bringing the full-year total to 170.8 million square feet, the lowest annual growth since 2011.
Apartment construction stays muted
Multifamily development is expected to remain sluggish in the first half of 2025 after declining at an annual rate of 25% in 2024, based on construction starts. But construction is expected to pick up in the second half of the year as renters fill up apartments that were overbuilt in some U.S. regions, according to the National Association of Home Builders.
High interest rates, along with lingering construction supply disruptions stemming from the pandemic, are likely to impede U.S. multifamily developers in the first half of 2025. But multifamily construction is expected to revert to long-term trends toward the end of 2025 as the market works through a substantial number of units under construction, and financing and demand fundamentals improve.
Office attendance hits post-pandemic high
Office attendance for 10 large U.S. cities averaged 54.5% of pre-pandemic levels for the week ended March 5, according to Kastle Systems. Average attendance has consistently hovered around 50% for the past year. The latest data showed Texas cities again leading for attendance relative to pre-pandemic levels, with Houston and Austin tied at 64% and Dallas posting at 62.9%.
Tariff concerns bring down retail sales
Severe winter weather and concerns over trade tariffs helped drive a February decline in U.S. retail sales from the prior month, according to the National Retail Federation. Total sales, excluding automobiles and gasoline, were down about 0.2% from January. For now, year-over-year gains reflect an economy with strong fundamentals, and year-to-date sales tracked about 4.4% ahead of the first two months of 2024.
