DC industrial vacancy falls to 7.6% as data-center demand grows

Industrial vacancy in Washington, D.C. fell to 7.6% in June, the only year-over-year decline among major Northeast markets, according to a Marcus & Millichap report cited by Connect CRE.

Tenants absorbed more than 3.3 million square feet of newer industrial space over the past year, the report says, working off a significant share of the market's new supply. Northern Virginia led the improvement, and the report links that to data-center growth creating additional space needs for contractors and other industrial users.

For funds holding Washington, D.C. industrial assets, the open question is how much of the rent roll depends on contractor tenants tied to data-center construction schedules.

Average asking rents rose 5.1% year over year, the fourth-largest increase among major U.S. industrial markets, the report found.

Northern Virginia has accounted for nearly 40% of U.S. data-center permit activity since 2022, the report says. Permit activity implies an extended period of fit-out and site work, which lands in industrial space as contractors lease yards, staging areas and warehouse bays.

Marcus & Millichap's October Construction Outlook, as Private Wealth Daily previously reported, expects limited new commercial construction to extend rent growth and flags water and power as constraints. That suggests contractor demand will track energization and permitting schedules more closely than the general warehouse cycle.