NAIOP Forecast: Industrial Space Demand Industrial Demand Expected to Grow at Low End of Normal Range
February 27, 2012
Washington, D.C. — The NAIOP Research Foundation today released the Industrial Space Demand Forecast, the fifth forecast from a model that analyzes important economic factors and net absorption data to predict future demand for industrial real estate.
The current annualized rate of growth (4Q2011) came in at .87 percent, which is in line with the 1.0 percent forecast. This rate is consistent with the readings during the past several quarters, which have ranged from .87-1.26 percent.
4Q2011 growth was slightly lower than the historical normal range of 1-2 percent per year. The finding continues to be consistent with readings of the overall economy, which has seen GDP growth that is still positive but below long-term averages. Nevertheless, 4Q2011 marks the sixth consecutive quarter of positive growth in industrial demand, following seven prior quarters of deep contractions.
Looking forward (see Table 2), most of the demand drivers are in the normal category, somewhat in sync with the growth in the United States and world economies. Growth that deviates too much from long- term norms is not expected in the near future. Strong demand growth isn’t expected until later in 2012, contingent upon the overall economy resuming more normalized growth and other risks, such as the continued issues in Europe.
Therefore, demand for industrial space is expected grow at an annualized rate of 1.01 percent in 1Q2012, which is at the low end of the normal range. Increasing rates of growth are expected to begin to occur into by the second or third quarter of 2012, barring exogenous shocks.
“Demand for industrial is very much tied to the overall economy,” said Thomas J. Bisacquino, NAIOP president and CEO. “Although still small, it’s encouraging to see some positive growth in the industrial markets, it is evident that the industry won’t return to more normal rates of growth until the U.S. and global economies stabilize.”
Industrial Space Demand Forecast Data
The Industrial Space Demand Forecast is part of ongoing data and analysis by Dr. Randy Anderson, University of Central Florida, and Dr. Hany Guirguis, Manhattan College. To read a research report regarding the methodology of the forecast and to download an accompanying graphic, www.naioprf.org.
Issued quarterly, the NAIOP Industrial Space Demand Forecast is based on Purchasing Manager Index (PMI) data provided by the Institute of Supply Management (ISM), Index of Manufacturing Output (IMO) data provided by the Federal Reserve, and net absorption data provided by CBRE Econometric Advisors.
About the NAIOP Research Foundation:
The NAIOP Research Foundation was established in 2000 as a 501(c)(3) organization to support the work of individuals and organizations engaged in real estate development, investment and operations. The Foundation’s core purpose is to provide these individuals and organizations with the highest level of research information on how real properties, especially office, industrial, retail and mixed-use properties, impact and benefit communities throughout North America. For more information on how to contribute or for complimentary research reports, visit www.naioprf.org.
NAIOP, the Commercial Real Estate Development Association, is the leading organization for developers, owners and related professionals in office, industrial, retail and mixed-use real estate. NAIOP comprises 15,000 members in North America. NAIOP advances responsible commercial real estate development and advocates for effective public policy. For more information, visit www.naiop.org.
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