By all accounts, the recovery in the industrial market has mirrored that of the US economy. That is, it’s on a gradual incline, with moderate upticks in demand, absorption, occupancy and, yes, even rents. And things are set to pick up next year, if recent trends in consumer behavior and companies’ post-Panamax planning are any indication.

Craig Meyer, Jones Lang LaSalle’s Los Angeles-based head of industrial brokerage, describes the market as “continuing to chug along.” Of the markets the firm tracks, four out of five are reporting positive absorption, and overall vacancy is continuing its gradual decline. Some markets, he adds, are even seeing rental growth.

He isn’t the only one seeing those trends. For the third quarter of 2012, net take-up of industrial space was at 27.5 million square feet, up from the 20.1 million in the second quarter and 24.8 million in Q3 2011, according to a recent industrial market report from Cassidy Turley.

The need for distribution centers related to Internet-generated sales is today one of the key drivers of demand for industrial space. According to JLL, “One-third of all demand for big-box space is tied to multi-channel retailers or ‘e-tailers.’

“The influx of e-commerce and m-commerce (mobile) has revolutionized the retail sector,” the firm states. “Retailers tapping multiple channels to sell their merchandise are finding it more cost effective to increase online logistics operations rather than open more traditional stores, requiring an entirely different distribution model. Therefore, retailers are evolving their regional distribution networks to include e-commerce distribution centers. Demand from these companies has been growing since 2009 and will continue to do so.”

Internet sales are growing at a pace faster than those through brick-and-mortar channels, according to Johannson Yap, chief investment officer of Chicago-based First Industrial Realty Trust. “Online commerce still represents a smaller portion of the actual retail sales in the US, but it’s growing more than twice the rate of regular sales,” he says. The use of smartphones and mobile technology has helped this growth, thanks to practices such as “showrooming,” where consumers might comparison-shop at physical stores but ultimately buy the product online…

 

…For the rest of this story, go to the November 2012 issue of Real Estate Forum online.