CHICAGO—Colliers International has just released its latest survey of the nation's industrial real estate market, and company officials could not be more optimistic.
“The industrial market has been on an upswing in a big way since 2012,” Jack Rosenberg, the Chicago-based national director for logistics and transportation, tells GlobeSt.com. “This is the strongest market for landlords that we've seen in 30 years.”
The 2015 Q1 North America Industrial Highlights Report shows that industrial absorption has hit a post-recession high. And strong economic fundamentals, including continued GDP and job growth, rising consumer optimism, and the growing demand from retailers for modern distribution centers, much of it driven by e-commerce, bodes well for the future.
The majority of US respondents forecast declining vacancy rates and rent increases. In addition, more than three times as many markets reported that they expect tenants to expand in the upcoming quarter.
The US industrial vacancy rate fell for the 21st straight quarter, Colliers found, down 10 bps to 7%. And US absorption in the quarter was 58.6 million square feet, up 21.4% year-over-year.
Landlords are certainly happy that rents have also swung upward in many markets. The average asking rent for warehouse space in the first quarter was up 25.6% year-over-year in Oakland, 24.6% in San Jose/Silicon Valley, 19.2% in Denver and 16.9% in Detroit. Bulk asking rents were up 23.6% year-over-year in Miami, 18.5% in Denver and 16% in Nashville. And flex/service asking rents were up 43.3% year-over-year in San Francisco, 16.1% in Chicago and 15.5% in Cincinnati.
Furthermore, in response to occupier demand, US developers added 49.7 million square feet to the nation's industrial base in the first quarter. And there are signs that this pace could accelerate.
“I've talked to people in many markets who say demand is greater than the new supply,” Rosenberg says. During the recovery developers were quite disciplined about launching new projects but we may “see a wave of new spec construction across the country that will hit the market in 2016 and 2017.”
It's possible that this wave will cause some oversupply issues in about 18 months, but that's “unknowable at this point because demand for space is just through the roof.”
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