BOSTON-According to CB Richard Ellis' Econometric Advisorsforecast, the industrial market will see national availability peakat 14.2% by the end of 3Q10. However, the fourth quarter will beginavailability's decline, eventually dropping almost a fullpercentage point lower by this time next year. Notably,industrial markets in the hardest hit areas of the housing crisisare ticking up; areas such as California, Florida and Nevada.

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"What drove the warehouse demand were things like furniture andconstruction materials," explains Luciana Suran, economist,CBRE-EA. This led to poor performance in those markets warehousespace as those housing necessities declined with the bottomingmarket. "In the past two quarters, we've started to seedemand in some of the major markets in those areas," Suran tellsGlobeSt.com. "Los Angeles for example, has seen positivedemand."

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This isn’t to say the market is rocketing back to health. Someof the lesser-affected areas, such as Indianapolis, never truly hada downturn for their industrial markets, since the housing crisisdid not hit a fevered pitch; so the health in these areas are to betaken with a grain of salt. "They're not coming out of this verystrongly," she explains. "It's really a slow climb."

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Many of the class B and C markets are still suffering asconsolidation made it more affordable to move for a nominal priceinto more modern class A product. Larger spaces also excelled, aslarger facilities were in more demand thanks to companiesperforming reorganizations accounting for space and economicefficiency. "Class A space, built within the last few years, withina certain size range (larger), didn't really experience anynegative demand as measured by net absorption during therecession," Suran says.

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And as the sector begins to look up, investors will take note,since industrial tends to be a more stable investment than some ofits more glamorous counterparts. "The lease lengths are prettylong," Suran points out. "So you don't see huge movements from yearto year." This also helps when looking forward at the upcoming FASBaccounting changes, which has other sectors concerned. "A warehouseis a warehouse," she says. "It doesn't take as much of aninvestment from a company as asay an office, so we're not expectingto see a huge reaction from the accounting changes." Simple put,offices on every level are more expensive; from build-outs tosquare-footage, everything jumps in price comparatively.

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As far as it's other investment qualities, industrial was ableto sustain a higher availability throughout the recession by beingmore nimble construction-wise. Suran notes how quickly constructionis able to stop, since a typical project takes only four to ninemonths creating a shorter pipeline to hold up when a recessionrears its head. The growing global economy is also a strongadvantage over other sectors, she explains.

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"If this economy is not doing well, we see other economies growfaster, which is what we're seeing now…exports driven marketsperform better," she explains. "Other property types don't havethat linkage to the global economy."

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Suran also points out that moving forward, markets withecommerce space are going to be the first out of the box. Theecommerce markets are coming back faster than other retail and theindustrial space which is linked to them will in turn will swiftlyhave a rising value.

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