LOS ANGELES—The national industrial market iscontinuing to expand, according to the 2Q14 industrial report fromLee & Associates, which GlobeSt.com hasexclusively. Compared to the same time in 2012, vacancy rates havefallen to 7.8%, from 9.4%, as net absorption and gross absorptionhave been trending up for the past two years.

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Industrial development is concentrated in the markets with themost available land, and, for that reason, will continue to grow ata faster pace than infill markets. This is something we have seenhere in Southern California, where developers are snatching up thelast remaining plots of developable land in infill markets, likethe recent REDA Bascom Ventures project launched in the City of Industry. Contributingto slowed growth in infill markets, some cities are encouragingdevelopers to redevelop older industrial areas for multifamily andretail projects. The combination has led to a shortage in qualityindustrial properties, leaving many users to either settle or waitfor a developer to augment the supply.

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The report outlines the economic conditions that contribute tothis growth to offer a more robust outlook. According to Leeexperts, GDP growth has been the “primarybenchmark” in determining economic health. For a recoveringeconomy, GDP growth is currently far below that of growth in otherrecovery cycles, sitting at about 2% and leaving a lot ofuncertainty in the market. However, energy production, specificallytechnology that reduces natural gases and oil, have created anenergy boom that has a positive affect on GDP growth, and willalternatively help to grow industrial expansion and spaceabsorption.

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Monetary policy was also one of the primaryfactors Lee noted has a significant impact on industrial growth,especially considering the Quantitative Easingpolicy enacted by the Fed, which has added $4 trillion to thebalance sheet. There is some fear that this program could propel aninflation cycle when phased out, which could cause mortgage ratesto rise and put upward pressure on cap rates. However, if theprogram can be phased out without provoking inflation, industriallease and sale activity could accelerate, and even the threat ofinflation may boost industrial sale activity, according to thereport.

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The report also covered the top US industrial markets in themajor US regions, which include Central Los Angeles, San Diego,Phoenix, Dallas/Fort Worth, St. Louis, Chicago, Atlanta, Orlando,Baltimore and New York. All of the markets are experiencingdeclining vacancy rates and all expect for New York areexperiencing increased net absorption rates. In a forecast, thereport shows that vacancy rates will continue to decline withabsorption slowing due to a lack of supply. Additionally, rentswill continue to rise moderately.

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We plan to update this story with more specific marketcoverage soon.

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.