Industrial’s Trajectory To Steepen Through '14
Keep up to date with the latest news from GlobeSt.com's National AM Alert. Sign Up Today!Want to learn best business practices and be positioned to Thrive in a competitive environment? Don't miss CCIM THRIVE on October 21-22 at the Westin Bonaventure in Los Angeles. This two-day event is designed to deliver more leading industry voices, more tangible market intelligence, from CCIM and Globest.com.
WASHINGTON, DC—Already exhibiting signs of recovery, the US industrial market could see as much as 150 million square feet of absorption this year. What’s more, next year’s take-up could hit 175 million square feet, according to the NAIOP Industrial Space Demand Forecast.
Those figures represent increases of 50% and 75%, respectively, over the 100 million square feet of absorption the industrial sector experienced in 2012.
The results aren’t really surprising, Dr. Randy Anderson, president of New York City-based Bluerock Real Estate LLC, tells GlobeSt. “Industrial has heated up,” he says. “We’ve been looking at the growth rate and trajectory of the ISM PMI, which is usually a year-out leading indicator of industrial demand, and it’s been gradually increasing. We’ve been watching the Federal Reserve’s index of manufacturing output, which is a six-month leading indicator, and it’s been strong over the past four to five quarters.”
Those factors—combined with some stabilization in the housing market and employment, stronger consumer confidence, a reduced threat of a double-dip recession and forecasted GDP growth of 2% to 3% over the next two years—all spell a healthier economy, says Anderson, who authored the forecast along with Dr. Hany Guirguis of Manhattan College.
“The industrial segment will experience strong and continuous growth from the first through the fourth quarter of 2014 due to clarity post-election and post-fiscal cliff, easing in the credit markets, and improvement in both consumer and business confidence,” he relates.
The forecast doesn’t look at specific geographic markets, Anderson says that both demand and activity should see an uptick across the US. “We see an increase in domestic manufacturing. We also see an increase in domestic and global GDP, with some strengthening in Europe and China expected in 2013 and 14. All of those things create additional demand for industrial space in the US as goods and services are shipped globally and around the country.”
Yet while all the data point to increased growth, he states, “we’re certainly not out of the woods, even domestically. There are still a lot of risks to the forecast, potential global concerns. And while we’re starting to get some strength coming out of China, the growth rate is nowhere near what we’ve seen in the recent past.”
Andersen and Guirguis received a research grant from the NAIOP Research Foundation in 2010 to develop a model for forecasting net absorption of industrial space in the US. Funded by the locally based organization, the researchers came up with a predictive model based on a process that involved testing more than 40 economic and real estate variables that theoretically relate to demand for industrial space. These include the Federal Reserve Board’s Index of Manufacturing Output, the Purchasing Managers Index from the Institute of Supply Management and net absorption data from CBRE Econometric Advisors.
Register now for RealShare INDUSTRIAL on November 4-5 in Miami. Hear about the latest opportunities from the nation's foremost experts.
You can now be notified via email if this story is updated by clicking on the "Follow this Story" link. You must be a registered member to take advantage of this "members only" benefit.