CBRE says recent declines in GDP were among the worst historically for many countries, with the major export-dependent nations of Asia seeing especially dramatic drops. On a year-over-year basis, Japanese Taiwanese and Chinese exports were down 45.6%, 35.7% and 17.1%, respectively, in Q1. The downturn has seen Asian governments take steps to reduce their reliance on exports to the West and strengthen support for domestic consumption.

According to the report, industrial production globally was growing about 5% per year in the early part of this decade, with much higher growth rates in Asia. But industrial production plunged in 2009, after a nearly flat performance in '08. However, CBRE predicts a very modest rise for industrial production next year, reflecting the expectation for a long recession and a middling recovery.

In regard to market performance, the report says average logistic rents declined in the major cities of mainland China--Beijing by 5.7%, Shanghai by 1.5% and Shenzhen by 5.1%, quarter over quarter--as well as in Hong Kong, Tokyo, Taipei and Singapore. As a result, capital values and land prices of industrial properties contracted throughout the region, though at varying rates. In the Pacific region, industrial rents were at best stable, but many markets saw them fall, with Brisbane taking the biggest tumble at 4.8%. Still, the overall rent decline was a modest 1.3% from a year ago.

In Europe, dramatic declines in industrial production hit especially hard in Spain, Ireland and the UK, which were already suffering from the effects of inflated levels of consumer debt and falling asset prices. But CB says the outlook for export-oriented economies such as Germany and Central and Eastern Europe has also weakened markedly.

According to the report, the US industrial availability rate increased 80 basis points in Q1 to 12.2%, marking the sixth consecutive quarter of rising availability and the highest rate in at least 20 years. The previous high was 11.7% in Q4 2003 and Q1 2004.

With imports and exports joining industrial production in sharp decline, demand reached an all-time low. At negative 92.8 million square feet, absorption was substantially worse than the previous low of 75.5 million square feet in Q2 '01. In Canada, the industrial availability rate increased to 6.7% from 6.2% at the end of '08. Rental rates decreased slightly, but only in select markets. With the decrease in oil prices and slowdown in US economy, industrial demand will remain weak for the near term.

CBRE says the one region to escape largely unscathed has been Latin America, which is still experiencing low vacancy rates and stable demand. There has been some retrenching among select multi-national firms, but overall there has not been a loss of confidence. Nonetheless, CBRE analysts expect vacancy rates will continue to creep up slowly, though they do not foresee an overall market implosion as has happened elsewhere.

Instant Insights /

Production Decline Boosts Industrial Vacancy Rates Worldwide

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