industrial park in Grand Prairie, TX Crow Holdings Industrial’s Wildlife Commerce Park in Grand Prairie, TX, near Dallas. Building 3 delivered in Q1 and Building 4 is underway; the project will total 2.8 million square feet when completed.

NEW YORK CITY—The first quarter brought 60.1 million square feet of new industrial space on line across the US, setting a new quarterly record and exceeding the old one by nearly 4.5 million square feet. That figure is hard to dispute, but its implications are open to interpretation.

“The rapid increase in new supply does warrant some caution,” according to Colliers International’s Q1 industrial forecast, issued Wednesday. “Post-recession, developer discipline kept speculative construction in check and absorption significantly higher than new supply. The trend could reverse in upcoming quarters.”

At present, about 185.5 million square feet of new product is under construction, mainly spec. That total is down 3.3% from the end of Q4 2015, due mainly to land constraints in certain markets. Slightly more than 60% of the Q1 deliveries were spec builds, for example, “with developers confident that demand from consolidation and e-commerce will quickly absorb this inventory,” according to the Colliers report.

The good news, aside from the fact that vacancies continue to decline—Q1’s new deliveries were outpaced by net absorption of 63.8 million square feet—is that the new construction is concentrated in a few markets with strong occupancy gains. Atlanta, for instance, led Q1 with 7.3 million square feet of deliveries, 70.2% of which was built on spec, but was also among the top five industrial markets for net absorption.

The current leader for under-construction industrial space is Dallas/Fort Worth, which accounts for 20 million square feet of the 185.5 million square feet rising across the US. More than 90% of that tally for D/FW is represented by spec builds; however, 34% of it was pre-leased at the end of Q1, up from 20% at the end of the previous quarter.

Although such a sizable proportion of spec development raises a few caution flags, there’s also the reasoning behind all the new construction: current demand drivers entail modern product. “Bulk inventory dominates construction in each of these markets to quenching demand from occupiers looking for higher clear heights, larger truck courts and other amenities necessary in modern logistics and e-commerce related functions,” according to Colliers’ report.

Moreover, as Avison Young’s Q1 industrial roundup points out, there are other considerations. “After years of consistent occupancy gains, most markets remain favorable to landlords, achieving higher rental rates and heightened leasing velocity; however, some regions report that leasing activity is inhibited by a lack of available expansion space, ultimately hindering absorption figures,” the AY report states.

“The outlook for the US industrial sector remains positive after the US. had another year of sustained employment growth and lower energy prices,” says Earl Webb, president of US operations at AY. “The need for additional industrial development is evidenced by low single-digit vacancy levels and strong leasing fundamentals across all major industrial cities.” He adds that the current favorable climate fr industrial owners is likely to prevail into 2017, “despite the necessary uptick in construction that’s occurring.”

In fact, AY notes that tight market conditions have actually led some owners to begin converting office buildings for industrial use, as on Long Island. Meanwhile, San Francisco and other municipalities have begun enforcing zoning ordinance fines to ensure that limited industrial space is not co-opted by office tenants. “US employment growth, demand for modern class A warehouse product with features such as higher ceiling heights and oversized truck bays, and the rise of e- commerce as well as the need to shorten the supply chain should keep this sector flourishing,” says Webb.

NEW YORK CITY—The first quarter brought 60.1 million square feet of new industrial space on line across the US, setting a new quarterly record and exceeding the old one by nearly 4.5 million square feet. That figure is hard to dispute, but its implications are open to interpretation.

“The rapid increase in new supply does warrant some caution,” according to Colliers International’s Q1 industrial forecast, issued Wednesday. “Post-recession, developer discipline kept speculative construction in check and absorption significantly higher than new supply. The trend could reverse in upcoming quarters.”

At present, about 185.5 million square feet of new product is under construction, mainly spec. That total is down 3.3% from the end of Q4 2015, due mainly to land constraints in certain markets. Slightly more than 60% of the Q1 deliveries were spec builds, for example, “with developers confident that demand from consolidation and e-commerce will quickly absorb this inventory,” according to the Colliers report.

The good news, aside from the fact that vacancies continue to decline—Q1’s new deliveries were outpaced by net absorption of 63.8 million square feet—is that the new construction is concentrated in a few markets with strong occupancy gains. Atlanta, for instance, led Q1 with 7.3 million square feet of deliveries, 70.2% of which was built on spec, but was also among the top five industrial markets for net absorption.

The current leader for under-construction industrial space is Dallas/Fort Worth, which accounts for 20 million square feet of the 185.5 million square feet rising across the US. More than 90% of that tally for D/FW is represented by spec builds; however, 34% of it was pre-leased at the end of Q1, up from 20% at the end of the previous quarter.

Although such a sizable proportion of spec development raises a few caution flags, there’s also the reasoning behind all the new construction: current demand drivers entail modern product. “Bulk inventory dominates construction in each of these markets to quenching demand from occupiers looking for higher clear heights, larger truck courts and other amenities necessary in modern logistics and e-commerce related functions,” according to Colliers’ report.

Moreover, as Avison Young’s Q1 industrial roundup points out, there are other considerations. “After years of consistent occupancy gains, most markets remain favorable to landlords, achieving higher rental rates and heightened leasing velocity; however, some regions report that leasing activity is inhibited by a lack of available expansion space, ultimately hindering absorption figures,” the AY report states.

“The outlook for the US industrial sector remains positive after the US. had another year of sustained employment growth and lower energy prices,” says Earl Webb, president of US operations at AY. “The need for additional industrial development is evidenced by low single-digit vacancy levels and strong leasing fundamentals across all major industrial cities.” He adds that the current favorable climate fr industrial owners is likely to prevail into 2017, “despite the necessary uptick in construction that’s occurring.”

In fact, AY notes that tight market conditions have actually led some owners to begin converting office buildings for industrial use, as on Long Island. Meanwhile, San Francisco and other municipalities have begun enforcing zoning ordinance fines to ensure that limited industrial space is not co-opted by office tenants. “US employment growth, demand for modern class A warehouse product with features such as higher ceiling heights and oversized truck bays, and the rise of e- commerce as well as the need to shorten the supply chain should keep this sector flourishing,” Webb says.