NEW YORK CITY—Declines in energy prices have had generally positive ramifications for industrial, as a new report from Cushman & Wakefield on the sector's North American outlook makes clear. Energy is one of the factors spurring economic growth across the US, Canada and Mexico, along with e-commerce, manufacturing and technology.

“Strengthening fundamentals throughout North America support a positive forecast for the next three years,” says Maria Sicola, head of research for C&W's Americas group. “We expect economic conditions to drive further improvement and growth in the industrial real estate sector.”

Along with helping to spur retail gains as consumers pay less at the pump—thus boosting the warehouse and logistics market—lower fuel costs are also a factor in demand for manufacturing space. C&W notes that domestic manufacturing is making “a highly anticipated comeback. The promises of cheaper domestic energy sources and rising labor costs around the world are prompting more manufacturers to set up shop locally.” Known as reshoring or in-sourcing, this trend is being picked up by a number of major companies now expanding operations in the US.

As a result, C&W says, 38.8 million square feet of manufacturing space was leased in 2014, and large build-to-suit projects are currently underway in the Atlanta, Denver and Chicago markets. “With manufacturers responding more quickly to local market demands, regional manufacturing will increasingly be seen as cost effective,” C&W says.

C&W also cites a highly skilled labor force in the energy sector as a growth factor when it comes to flex space absorption, although the leader in that regard is Silicon Valley. It's the case for both Dallas and Denver, where energy is cited as one of the key industries helping to power space absorption (the others being tech for Dallas and aerospace for Denver). Together with Boston, Dallas and Denver are expected to absorb a total of 4.8 million square feet over the next three years. Denver, in particular, is predicted to have one of the lowest vacancy rates across the US by 2017: 5.9%, matching the Inland Empire and only slightly behind Orange County's predicted 5.8% vacancy rate

That being the case, a dominant energy sector is potentially a liability for Houston's industrial market. In common with other Gulf Coast and East Coast ports, Houston has captured some market share from West Coast ports, “chalking up one of its best years on record in 2014,” according to C&W. Accordingly, rental rates have increased by more than 13% in the past year and are projected to reach $6.17 per square foot in '17.

“However, the recent drop in oil prices—while largely positive for the US economy—is a concern and is prompting market watchers to focus on this strong performing market,” according to C&W. “The outlook for Houston in 2015 remains highly contingent on energy pricing. Demand for new space should abate along with the slowing in the energy sector, and 2015 is likely to see a slight correction in real estate fundamentals.”

A similar dichotomy is at work north of the border, where a more competitive dollar is helping to boost manufacturing activity. “Lower oil prices will further spur manufacturing activity in Ontario and Quebec, which are both expected to see accelerated GDP growth in 2015,” according to C&W's report. “However, it is a different story for oil-rich economies such as Alberta, Newfoundland and Labrador, and Saskatchewan, which are recalibrating outlooks based on dramatically lower oil prices.”