U.S. job growth and the performance of the industrial market are deeply intertwined. As jobs are created, industrial space is absorbed, vacancy rates fall, and rental rates increase. Since 2011, the U.S. has steadily added jobs (albeit more slowly than most wish for) and seen subsequent improvement across the nation in the industrial market. The U.S. industrial sector has now absorbed more than 288 msf of space from 2011-2013
ALMOST ALL SECTORS ADDING JOBS
Almost all sectors other than government have added jobs since 2011. Total U.S. nonfarm payroll employment increased by 113,000 in January. In 2013, employment growth averaged 194,000 per month. Key for industrial, job gains occurred in construction, manufacturing, mining and wholesale trade. Construction added 48,000 jobs in January, more than offsetting a decline of 22,000 in December. Employment in manufacturing, one of the few sectors that have yet to fully recover from the recession, increased in January (+21,000). With greater demand for industrial space, leasing activity has been strong and was up 6.2% from last year, totaling 328.5 msf at year-end 2013, the highest year-end total since 2005.
NEW CONSTRUCTION IS STRONG
The story for industrial continues to be new construction, both recently completed and expected completions in 2014. In 2013, among the major metro areas covered by Cushman & Wakefield, new construction completions have more than tripled since 2010, and should increase about another 20% in 2014. As 2013 came to a close, 79.4 msf of new industrial space was under construction, up 87% compared to a year ago.
COASTAL AND CENTRALLY LOCATED CITIES GROW
Not surprisingly, strong growth is occurring in port cities and in centrally located metro areas. Inland Empire in California, Chicago, New Jersey, Dallas and Houston are all cities with high amounts of new construction, absorption and rental rate growth. The Inland Empire led the nation in construction activity at the end of the year with 17.5 msf in development, followed by Dallas/Fort Worth with 10.5 msf. Meanwhile, Northern New Jersey’s overall vacancy rate declined to 8.0%, 210 bps lower than this time last year.