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Cap rates rose to 7.3% for warehouse properties and 7.2% for flex properties in Q3, according to Grubb & Ellis. The former was up 50 basis points and the latter 30 basis points from a year ago. Industrial property sales totaled $4.7 billion in the quarter, off 68% percent from last year, but the broker does not expect a comparable drop in the current quarter.

Investment returns averaged -0.01% (unleveraged) for institutional grade properties, compared with 3.19% 12 months earlier. G&E anticipates further deterioration. The Q3 vacancy rate of 8.5% was up from 7.6% last year and is expected to go higher as developers continue to deliver new space despite reduced tenant demand.

Annual asking rents of $4.60 per square foot for warehouse space were down 0.3% compared to last year, while the $10.55 a square foot average for R&D/flex space was up 1.2%, but the brokerage predicts both will fall in coming months. According to G&E, the greatest new risk facing the industrial property sector is legislation that discourages international trade growth.

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