U.S. ANNUAL GDP VS. INDUSTRIAL LEASING
- The above chart highlights the correlation between the nation’s annual GDP and U.S. industrial new leasing activity. The U.S. economy began to grow at a more brisk rate starting in 2002 and 2003 as the recession was behind us. From 2003 to 2005, the GDP edged higher by 5.8% while new leasing volume of industrial space ascended markedly by 27.5%. In that time, vacancy fell to 8.1%, a low not previously seen since the end of 2001.
- After peaking in 2005, industrial demand began to slow as annual GDP growth decelerated to an average of 2.3% annually, the next two years. However, demand was healthy enough to push the U.S. industrial vacancy rate down to 7.2% in 2007.
- As the nation entered into its second recession in less than ten years, the need for industrial space (specifically warehouse/distribution) dwindled. In turn, new leasing activity fell by almost 30% in the next two years. Meanwhile U.S. GDP shrunk by 3.4% in that same time. More than 131 million square feet of industrial space was negatively absorbed from 2008 to 2009, causing vacancy to jump 3.2 percentage points to 10.4% at year-end 2009.
- Since 2009, while the U.S. GDP has not grown at previous levels, it has had a positive effect on industrial demand. Leasing activity in the country has risen each year since, propelling overall net absorption to total more than 202 msf from 2010 through 2012. Overall vacancy returned to pre-recession levels at 8.3% at the close of 2012. Industrial demand is projected to remain strong through 2013, which should further improve vacancy levels in most major markets.
Source: Cushman & Wakefield Research. Moody’s Analytics. Only markets tracked by Cushman & Wakefield offices are included in this analysis