National Industrial Flat Until Mid-2011

CHICAGO-While vacancy and absorption was solid in the first half of 2010, and leasing increased, researchers at Jones Lang LaSalle say that national industrial activity will slow to a crawl during the next 12 months. Low job growth, rent and consumer confidence will keep the industrial markets flat, the company said in its recent Industrial Outlook report.

Craig Meyer, managing director and head of the company’s logistics and industrial services group, tells GlobeSt.com that though there has been positive news, the economy will not rebound in a quick fashion. National average vacancy rates dropped for the first time in two years to 10.4%, Meyer says, but absorption remains at a negative 7.4 million square feet for the first six months.

“We looked at the numbers after the second quarter and saw this great uptick. The flipside, however, is that as we head into the third quarter, we’re not feeling good. Employment is still problematic, we’re getting mixed signals about consumer confidence. I’m not saying that we are skidding, or even suggesting a double-dip recession…I would call it a ‘backing off the accelerator’,” Meyer says.

There are some positives, he says. There’s very little construction, only about 11.3 million square feet, and 83% of that is pre-leased, suggesting that build-to-suit activity could make a comeback, Meyer says. Many corporations have had to restock, and pent-up demand leasing activity has revolved around this need, along with renewals and expansions keeping the industrial market strong. New Jersey, the Inland Empire and Dallas have been exceptional markets, while Chicago and Los Angeles account for a combined 8.3 million square feet of negative net absorption so far this year.

However, rents are still declining across the country, he says. This rate of decline slowed in the second quarter, but will likely stay flat until mid-2011, Meyer says. Many in the market will be watching the seasonal sales figures intently, he says. “There hasn’t been the increase of holiday stocking that we are used to seeing. There is an uptick in manufacturing jobs, but it’s not that significant. We’ll probably be flat with leasing activity until at least Q2 2011, backing off this growth spurt we had in the first half of the year.”