2024 Mid-Year Review: Key Trends in Industrial Site Selection

At the beginning of each year, Site Selection Group highlights site selection themes for industrial companies to anticipate for that year. In January, we published a blog that touched on three predicted trends:

1. The inventory of quality industrial sites will vary greatly based on a project’s requirements.
2. The competition for existing industrial buildings will be at the lowest point since 2020, likely lower than ’25 and ’26 will be.
3. Despite significant investments across the U.S. in electric generation and transmission, as well as municipal utility systems (water and wastewater), large industrial projects will still face capacity challenges and lengthy equipment lead times.

Now that half the year is behind us and we have more clarity on how 2024 will round out, we thought it would be a good time to assess the accuracy of these predictions as well as highlight several other thoughts about what will shape the next six months.

Prediction 1: The inventory of quality industrial sites will vary greatly based on a project’s requirements.

While our assessment of available sites for small and mid-sized projects was spot-on, the availability of sites for mega-projects did not prove to be quite as constrained as we feared. This pleasant surprise is due to the following:

• Significant investments made by states, utilities and local economic development partners to improve their product
• Tempered demand for such product as compared to 2022 and 2023
• Several mega sites coming back to market after previously announced projects never came to fruition

Prediction 2: The 2024 competition for existing industrial buildings will be at the lowest point since 2020

This trend is tremendously accurate, and the industrial sector will remain a tenant’s market (relative to the last three years) for the foreseeable future. In the classic institutional development markets, there is a significant number of vacant concrete boxes and their duration on the market is growing daily.

Prediction 3: Large industrial projects still face utility capacity challenges and lengthy equipment lead times

Nothing Site Selection Group has seen in the first six months of 2024 suggests otherwise. We routinely encounter overly constrained municipal water and wastewater systems, and the elevated cost of capital is making large-scale improvements difficult for cities and counties to stomach. While lead times on certain electrical infrastructure items have declined, it typically takes more than three years to make significant transmission improvements (e.g. designing, permitting, constructing and equipping a substation).

The second half of 2024 will have many storylines that will impact industrial site selection

The latter half of 2024 is shaping up to be one filled with storylines that can have a profound impact on industrial site selection. Site Selection Group is committed to monitoring and assessing the impact of the following:

Presidential election

Several policy decisions can significantly impact domestic industrial activity. Those include the continued support of federal programs for green technology and U.S. tariff policies with Mexico and China.

Interest rates

The Federal Reserve is finally signaling it plans to drop rates in the fall, but that is turning into a political topic. It will be interesting to see if that gives a jolt to project activity.

Inflation and consumer spending

Despite the recent inflationary period, consumer spending has been more resilient than most thought. But with the uncertainty of the election and other macro factors, a drop in consumer spending and its impact on domestic production should be on everybody’s radar.