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BOSTON-While US warehouse demand has generally slowed, with net absorption for the first three quarters down 44% from the same period in 2006 and 51% from ’05, demand in the Midwest is rising, says Luciana Suran, an economist in the Boston office of CBRE/Torto Wheaton Research. The increase is notable, she observes, given that regional absorption trends tend to move together.

As to why might imports to the Midwest might be growing faster than other regions, she ventures that part of the answer could be related to increasing global trade flows and the growing US domestic shipping market creating demand for regional distribution centers located closer to customers. For example, she notes, FedEx is significantly expanding its operations in Indianapolis and Ohio as part of a multi-billion dollar plan to nearly double its daily North American package volume capacity. In addition, markets such as St. Louis, Kansas City, MO and Indianapolis have well-developed transportation infrastructures with extensive rail and highway connections as well as an inland waterway system, making the movement of goods easier and faster.

“The rapid growth of the manufactured goods exported from the Midwest, such as autos, farming equipment, and machinery could also be behind the increase,” she suggests. “On a national level, exports explain less variation in warehouse demand than imports do, but we should remember that the Midwest is known as the nation’s manufacturing hub.”

As Suran points out, manufactured exports to other countries are booming thanks to the falling dollar and strong global growth. Furthermore, many US-made goods contain parts made in other countries. Ford and GM cars, for example, contain components produced from China to India or Mexico, meaning that the Midwest needs to import more in order to export more.

According to Suran, the increase in Midwestern warehouse demand and its divergence from the national trend serves as a reminder that when it comes to warehouse space not all regions are created equal. “Not only is Midwestern warehouse demand increasing,” she says, “but Midwestern availability rates for warehouse space declined by the greatest amount–70 basis points–since January. Regional opportunities exist even in times of economic uncertainty; finding them takes some time, but it’s well worth the wait.”

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