Originally published on March 19, 2024, by Beth Mattson-Teig for UrbanLand Magazine. 

Demand for industrial space has pushed vacancies to historically low levels. But the high tide may no longer be lifting all boats. A surge in new supply along with a growing appetite for more modern facilities is putting more pressure on the sector’s aging building stock. Legacy buildings are having a tougher time keeping up with the changing demands of today’s space users.

“Advancements in technology and the functionality of new buildings, material handling systems, and the overall supply chain have been continuously improving and evolving,” says Jack R. Cline Jr., president of Lee & Associates in Los Angeles. Legacy logistics companies in particular are utilizing more advanced logistics systems that emphasize efficient movement of freight. Among the key features that logistics tenants require is adequate space for container/truck staging, ceiling heights of 36 to 40 feet, high door-to-square footage ratios, and more substantial power service.

At the same time, the influx of new supply has increased competitionfurther widening the gap between old and new assets. Continued expansion of e-commerce during COVID-19 fueled a blistering pace of industrial development with 518.4 million square feet in completions in 2022 followed by a record high level of 609.6 million square feet last year, according to Cushman & Wakefield. Overall net absorption totaled roughly 224.3 million square feet for the year, with almost all of the positive absorption concentrated in newly delivered, pre-leased industrial facilities.