Yardi Matrix labeled 2023 a “year of transition” for the industrial real estate sector, with relieved economic stresses and emergent new catalysts clashing against one big roadblock in the form of the volatile and elevated interest rate environment.

Perhaps the biggest positive development to impact industrial real estate last year was the normalization of activity at the nation’s ports, many of which saw cargo volumes return to pre-pandemic levels. The pendulum of consumer preference has swung back toward services since lockdowns have dissipated and inflation has reduced many Americans’ spending power, moderating the demand for goods.

Yardi pointed to the ports of Los Angeles and Long Beach, two of the busiest on the West Coast, as an example. Together, the two ports handled 17% fewer containers through the first 10 months of 2023 than they did during the same time frame in 2022. Nominally, that’s not great news, but many of the country’s largest cargo ports were stretched thin during the pandemic era, and the recent easing of container traffic has been a boon for efficiency.

Port activity has also been subdued in part by a recent surge in nearshoring and reshoring. Mexico surpassed China last year as America’s biggest trade partner, with 15.5% of total export volume in October from Mexico compared to 15% from China, per figures from the U.S. Census Bureau. Recent upticks in manufacturing have also provided a boost to industrial real estate in general, with the growth in supply chains for electric vehicles, in particular, breaking ground in the Midwest and South.

Unfortunately, such developments have been offset by the interest rate landscape of the past year. Only $48.6 billion in industrial property sales occurred from January through November, compared to $129 billion in 2021 and $101.2 billion in 2022. Sales prices, however, have remained buoyant, growing from $123 per square foot in 2022 to $130 in 2023.