HEALTHY DEMAND LEADS TO VACANCY DECLINES IN MAJOR U.S. MARKETS
- Due to an increase in demand, the U.S. Industrial market as a whole has seen more than 141 million square feet of positive absorption since the start of 2012. In turn, the national vacancy rate has fallen by 1.2 percentage points in that time. The nine major U.S. markets totaled more than 295 msf of leasing in the last year and a half, 63% of the nation’s total for this time period.
- Across most of the major U.S. industrial markets, build-to-suit (BTS) demand has been robust. Some recent significant BTS leases included Procter & Gamble, Amazon.com, Home Depot, PepsiCo, Inc., Unilever, Crayola and Petsmart. Meanwhile, demand drivers for many of the major markets included retailers/wholesalers, E-commerce, and logistics companies. However, in Houston, the energy industry accounted for a bulk of the leases signed in the last 18 months.
- Even with increased construction, steady demand has kept vacancies low in most major markets. Dallas/Fort Worth, Chicago, Orange County and Atlanta saw overall vacancy fall by more than 1.5 percentage points since the close of 2011.
- Class A space continues to diminish in many markets as tenant demand remained steady. With quality options dwindling, both BTS and spec construction have gained some momentum in some markets. In other markets such as Los Angeles and Chicago, class B demand has increased due to the limited amount of class A availabilities.
- Supply growth in the U.S. is still muted overall and where development is occurring, much of the space is being absorbed. Improved market fundamentals have pushed rents slowly in a positive direction. Even against a backdrop of slower economic growth, the U.S. industrial sector will continue on a strong note in the second half of 2013.
Sources: Cushman & Wakefield Research. Only markets tracked by Cushman & Wakefield offices are included in this analysis. Rental rates are direct rents.