New U.S. Industrial Leases Return to Prior Peak, Renewals Drop

The U.S. industrial new lease count index has returned to its historical peak, while the renewal index has fallen, according to data from CoStar, the leading global provider of online real estate marketplaces, information and analytics in the property markets.

Large tenants have led new-lease recovery, as the index for leases of 200,000 square feet or more has climbed to 92% of its peak, while the 50,000 – 199,999 square-foot segment has recovered to about 90%.

Smaller tenants remain closer to prior leasing highs, with all categories below 50,000 square feet standing at roughly 91-98% of the peak, although momentum has begun to level off in several size ranges.

“While new leasing activity has recovered, it does not translate one-for-one into net absorption,” said Juan Arias, national director of industrial analytics at CoStar Group. “Relocations and weaker renewals can leave space behind, meaning recovery will also be influenced on how quickly landlords can backfill existing buildings. Nationally, demand is extending beyond the newest warehouses into older buildings larger than 500,000 square feet, while midsized buildings still face excess supply and elevated competition for tenants.”

Among the major markets, Dallas-Fort Worth and Austin lead recovery at 97% and 95% of peak, respectively, on average across size bands. Those markets, along with Houston, have reached their historical peak for leases of 200,000 square feet or more.

Recovery remains uneven across markets, with St. Louis, East Bay and Cincinnati averaging only 53-59% of peak across size bands, which is the softest performance of the top 50 markets.

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