Newmark: Industrial Sector Shows Solid Outlook, but Headwinds Persist

(Warehouse stock photo courtesy Tristan via

Newmark, New York, found the industrial market had some challenges in the first quarter, but the sector remains on a long-term growth trajectory.

In its National Industrial Market Conditions & Trends report for Q1, Newmark highlighted the tighter lending environment and higher-priced debt’s impact on the industrial market.

While retail spending remains resilient, a constricted credit environment affected by failures of a few high-profile banks may dampen consumption, Newmark noted. The share of banks tightening standards for construction loans rose to nearly 70% in the first quarter.

Global supply chain transformation spells good news for the sector, along with advanced manufacturing that is continuing to expand domestically. Newmark noted, for example, recent federal legislative investment in categories such as chip manufacturing and electric vehicle production.

The report acknowledged demand is decelerating somewhat–absorption in the quarter totaled 64.3 million square feet, a first-quarter record compared with pre-pandemic history, but a 40.4% decline from Q4 2022. Newmark pegged that as a larger-than-usual decrease. Additionally, the construction pipeline trended downward for the second consecutive quarter.

However, annual rent growth posted its highest gain at 21.1%. Newmark forecast scenarios show decelerating but still strong rent growth through the end of the year.

Newmark also found capital markets continue to cool. Sales volume in the first quarter dropped nearly 55% year-over-year but was right in line with pre-pandemic history. Industrial cap rates were up 70 basis points from the prior quarter and seem likely to be further affected by the cost of debt through 2023.

“Record industrial loan maturities (heavily concentrated in bank and securitized borrowings) are coming due between 2023 and 2024,” the report said. “However, among all property types, the industrial sector has the lowest share of at-risk securitized debt maturing over this time frame.”