The forecast for North American industrial absorption in 2020-2021 is a healthy 459.9 million sq. ft., according to C&W. The firm projects new supply—which surpassed demand in 2019—will continue to do so over the next two years. Supply levels are projected to reach 573.4 million sq. ft. of new industrial product from 2020 to 2021.

Below are the top 10 markets measured by projected net absorption in 2020 and 2021.

After several years of absorption outpacing supply by healthy margins, C&W is projecting that supply will push ahead in each of the next two years. As a result, North American vacancy will remain anchored around the 5 percent mark, ending 2021 at 5.2 percent—an increase of 60 basis points (bps) over year-end 2019.

After several years of absorption outpacing supply by healthy margins, C&W is projecting that supply will push ahead in each of the next two years. As a result, North American vacancy will remain anchored around the 5 percent mark, ending 2021 at 5.2 percent—an increase of 60 basis points (bps) over year-end 2019.

According to the report, "In 2019, industrial transactions constituted 18.7 percent of total U.S. transaction activity—up from just 9.8 percent in 2014, before the current industrial boom began, and 11.2 percent in 2008, the peak of the previous cycle. Industrial appetite has increased across investor groups, most notably institutional and public vehicle investors."

Interest rates fell sharply in 2019. This has lead to lower financing costs and also pushed yields down on Treasuries. As a result, according to the report, "while cap rates are at all-time lows, the excess yield that investors earn after subtracting financing costs was 273 bps as of Q4 2019—89 bps above the long-term average. The last time the equity premium was this high was late-2014—near the beginning of the current industrial investment boom. We expect this to sustain current low cap rates but see further broad-based cap rate compression as unlikely.

Cap rate trends in secondary industrial markets.

Cap rate trends in tertiary industrial markets.