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NEW YORK-Industrial markets along the southern coastline of the United States are showing clear signs of recovery, according to fresh analysis by Cushman & Wakefield. The signs are economic indicators such as industrial production, employment trends, increases in personal income and population growth, which have been rising in sharp contrast to other regions of the country, according to the report, which examined a 33 markets.

“Strong exports of chemicals, textiles, and computers are fueling the South’s rebound,” says C&W’s senior managing director of industrial services Pamela Zoellner. “The defense industry has also had a strong impact on the South. Fifteen percent of the expenditures for defense last year went to contractors and military bases in Southern states.”

Atlanta continues to lead the nation in total square feet leased and sold year-to-date, according to the C&W. Gains in both leasing and sales activity (over 2002 trends) were consistent throughout Florida, particularly in Orlando and West Palm Beach. Top performers on the West Coast were in southern California, where the absorption of industrial space was greatest in Ontario and Orange County. Phoenix, from the Southwest, ranked first nationwide for the market with the most significant increase in industrial leasing activity over the last 12 months.

Warehouse/distribution and office service/showroom space lead the U.S. industrial market in occupancy levels, with a combined 11.3 million sf of positive absorption year-to-date. Ninety-three percent of this total has occurred since mid-year 2003, which C&W says points to a rising demand for space in response to improving market conditions.

Total leasing activity year-to-date is down 4.5% from the same 2002 period (205 million sf versus 214 million sf last year). C&W research director Cynthia Jeter says the decrease in leasing activity is in part due to corporate consolidations and more efficient use of space by industrial users trying to offset their real estate costs.

Meanwhile, construction completions are off 36.4% when compared to 2002, but may be on the rise. Space currently under construction is greater now, by 8.4 million sf, than the total reported at the end of the third quarter of 2002. The demand that is there continues to be for modern warehouse/distribution facilities. Of the 36 million sf completed so far this year, more than 85% was new warehouse/distribution.

On the investment front, activity in the industrial sector has thrived throughout the nation’s soft real estate cycle, according to C&W. A total of 76.5 million sf traded through the third quarter, which is 17.7 million sf more than the same 2002 period. Product in Atlanta has been the most sought after by investors, reporting 13.8 million sf in trades year-to-date, almost 65% above its nearest rival, Chicago.

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