Crow Holdings Capital believes the industrial sector has entered a normalization phase after several years of rapid expansion (Costar Q4 2024). Despite oversupply in certain markets, Industrial remains a favored sector for the firm. CHC believes fundamentals today are supported by stable demand and slowing new supply.

Despite supply headwinds, 2024 was the third best industrial leasing year on record, with new leasing increasing by 4.5% and renewal activity increasing by 9.3% over 2023 (CBRE Research, Q4 2024). While lower-than-average vacancy rates (CoStar as of Q4 2024) spurred new development in 2022-2024, starts and deliveries have slowed substantially, with inventory under construction declining for ten straight quarters and starts down ~70% from mid-2022 peak (CBRE Research, Q2 2025; Green Street Industrial Sector Update, March 2025).

CHC believes demand for new space is driven by macro trends and the obsolescence of existing industrial stock. Nearly 70% of existing industrial inventory was built before the 21st century, and Class A stock warehouse accounts for less than 20% of total industrial assets (CBRE-EA, Clarion Partners Investment Research, Q1 2024). Demand is bolstered by other long-term drivers such as the broadening adoption of e-commerce and nearshoring/onshoring trends (FRED, Q4 2024; Cushman & Wakefield Insights; U.S. Census Bureau, March 2025; CBRE, Q4 2024).The convenience and choice of online shopping is evidenced by a 102%% increase in e-commerce sales from 2020 to 2024 versus 33% increase in total retail sales during the same period (St. Louis Federal Reserve Economic Data (“FRED”), Q4 2024).

Rent growth, which consistently exceeded 6% in recent years, is expected to revert to its 20-year average of 3.5% (CoStar as of Q4 2024). For seasoned assets, in-place rents are significantly below market rents, representing a large loss-to-lease and supporting NOI growth as leases turn over (Crow Holdings Capital, 2025 Real Estate Outlook). CHC estimates market rents could be as much as 25% higher than in-place leases, depending upon building sub-type (Crow Holdings Capital, 2025 Real Estate Outlook). Thus, if these trends materialize as projected, it could lead to NOI growth of at least 5% over the next five years (Crow Holdings Capital, 2025 Real Estate Outlook).

CHC believes macro demand drivers coupled with declining supply should bolster sector fundamentals for high-quality, well-located industrial real estate, especially in high-barrier, high-growth markets.