CALABASAS, CA—It's a landlord's market in the industrial sector at mid-year 2015, and it will remain as the year ends. That will be the case even with an estimated 130 million square feet of new supply coming on line, says Marcus & Millichap in its midyear National Industrial Research Market Report.

In contrast to the multifamily sector, where MMI predicts a slight uptick in vacancy due to a boom in new construction, all that new industrial supply won't keep pace with demand. The investment sales firm and GlobeSt.com Thought Leader sees the national vacancy rate plummeting another 70 basis points to a 15-year low of 6.5% by year end as industrial demand absorbs 170 million square feet, “surpassing the competitive space delivered to the market.”

Corroborating that prediction is another newly issued national report on the industrial sector, from Colliers International. The Colliers report notes that first-quarter space absorption across the US was 58.6 million square feet, up 21.4% year-over-year.

On average, the US vacancy rate dipped 15 bps to 7% during Q1, Colliers says. Some areas of the country did even better than that, though: regionally, the West saw the biggest decline in vacancy, shedding 30 bps to reach 5.1%, while the best-performing markets during Q1 were Northern New Jersey and Little Rock, AR, both of which experienced 90-bp declines.

MMI doesn't see increases in absorption and decreases in vacancy ebbing any time soon. “Net absorption for a variety of industrial spaces has steadily improved in tandem with the US economy,” according to MMI's report, prepared with input from MMI's National Office and Industrial Properties Group, led by national director Alan Pontius.

“Demand for bulk industrial space often recovers first, leaving slack in the small and midsize markets. Internet businesses and retailers are a segment that will reshape the industrial sector in the coming year as businesses compete on speed of delivery, forcing retailers to find warehouse locations proximate to major population centers.”

The firm also reports that escalations in sales of houses and cars have boosted industrial demand. “After reaching a trough in early 2009 and remaining muted through much of the recovery, auto sales are finally returning to pre-downturn levels,” the report states. “The housing market also appears to have turned a corner, lifting demand for a wide range of housing-related industrial tenants.”

Together together, “these trends will boost local industrial demand, lift investor activity and attract capital at low cap rates,” according to MMI. Already, sales transaction volume hit a record $17.5 billion in Q1, according to Real Capital Analytics. “The bull market has begun rippling beyond major port and distribution markets to reach a broad swath of metros.”

Colliers reports that industrial rents are on the rise, thanks to the combination of positive absorption and tightening market conditions in several key markets. The average asking rent for warehouse buildings rose to $5.16 per square foot on a triple-net basis in Q1, up 2.1% from the previous quarter and 13.9% higher than the bottom reached in Q3 2011.

The quarter was also marked by double-digit increases in asking rents for some key markets, Colliers says. Among them were the warehouse markets of Oakland, CA (up 25.6%); San Jose – Silicon Valley (24.6%); Denver (19.2%); and Detroit (16.9%).

Denver was also a winner in asking rents for bulk space during Q1, as were Miami and Nashville, along with the Waterloo Region in Canada's Ontario province. Markets where flex/service asking rents were up year-over-year in Q1 include San Francisco with a whopping 43.3% increase, Miami, Ottawa, Chicago, San Diego and Cincinnati.