Colliers International: U.S. Industrial Real Estate Market Remains Healthy - Global Trade Magazine
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  May 26th, 2016 | Written by

Colliers International: U.S. Industrial Real Estate Market Remains Healthy

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  • The U.S. industrial vacancy rate declined for the 22nd consecutive quarter.
  • The 60.1 million square feet of new industrial supply in Q1 were the most for any quarter on record.
  • Lower vacancies increased asking rates for the 18th consecutive quarter, to $5.52 per square foot.

The U.S. industrial vacancy rate declined for the 22nd consecutive quarter to 6.3 percent, the lowest vacancy rate in over a decade.

That fact, along with other impressive numbers released by Colliers International in its Q1 2016 QU.S. Industrial Market Outlook Report, lead the real estate investments firm to conclude that, “despite conflicting economic drivers, the U.S. industrial market remains healthy.”

Occupier demand continues to outpace new supply, the report found, with over 63.8 million square feet (MSF) absorbed in the first quarter of 2016, 9.6 percent higher than this time last year. This compares to 60.1 MSF of new supply from construction completions during the quarter.

The new construction completions were the most for any quarter on record. Developer confidence continues to increase, as 60.7 percent of the new supply was speculative.

Lower vacancies increased asking rates for the 18th consecutive quarter, $5.52 per square foot (psf), 15 basis points higher than the previous quarter and 72 basis points higher than this time last year.

Of the 70 U.S. markets surveyed, over 63 percent expect industrial rents to rise in the coming quarters. Nearly half of respondents expect vacancies to tighten, with the northeast region most bullish at 78 percent.

Chicago dominated the growth of the industrial real estate market in the first quarter of this year with over 8.7 MSF of occupancy gains or 13.8 percent of the U.S. total. Dallas-Ft.Worth, California’s Inland Empire, Atlanta, and Philadelphia all posted robust absorption in Q1 with occupiers continuing to locate consolidated distribution hubs in these regions.

Charleston and Savannah, two port markets looking to take advantage of the Panama Canal expansion, led the nation in absorption as a percent of inventory. Both finished the first quarter at 2.7 percent and 1.9 percent, respectively.

Demand drivers for industrial real estate are sound, Colliers concluded. “While the economy faces significant headwinds,” the report said, “the need for modern industrial space will keep absorption positive and rents ascending for the foreseeable future.”

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