After visiting Atlanta, Dallas, Chicago, and New Jersey over the past 5 weeks, we definitely agree with the below article. We have heard first hand that the overall industrial market should expect to see continued positive absorption in 2011.
By Paul Bubny
NEW YORK CITY-Absorption across the 34 industrial markets tracked by Cushman & Wakefield turned positive at the end of 2010, for the first time since the second quarter of 2008, the firm said Tuesday. Along with an uptick in leasing, a 74% year-over-year decline in new construction proved to be a boon in terms of industrial vacancies.
“Positive absorption for the first time in two-and-a-half years is an extremely positive sign for the U.S. industrial market,” Maria Sicola, executive managing director and head of Americas research at C&W, says in a release. “Historically low construction rates will keep supply limited, giving us the possibility of rent increases later this year.” Rents rose slightly in the fourth quarter of ’10 to an average $5.51 per square foot, after 10 consecutive quarters of declines
In fact, the ’10 new construction total of 15.9 million square feet was not only a sharp dropoff from 2009?s tally of 61.9 million square feet, it’s also about 65% less than the previous low point of 45.5 million square feet recorded in 1995. C&W says the past year ended at positive 13.1 million square feet of absorption, compared to negative 125.2 million square feet at the end of ’09.
A 16.5% increase in leasing activity, with Q4 especially strong, brought volume up to 268.8 million square feet, according to C&W. This helped drive down vacancy rates to an average of 10.3%, with 27 of the markets tracked by C&W seeing quarter-over-quarter vacancy declines. Markets with the biggest vacancy drops from Q3 to Q4 included the Pennsylvania I-81/I-78 distribution corridor, down from 13.6% in Q3 to 12%; Palm Beach, FL, down from 9.9% to 9%; and California’s Inland Empire market, where vacancies fell from 11.7% to 11%.
On the investment front as well, activity accelerated dramatically in the preceding 12 months. Just under 100 million square feet of industrial property changed hands, compared to 60.5 million square feet in ’09 and marking the strongest yearly performance since 2007, according to C&W. In a release, Jim Dieter, Chicago-based EVP and head of C&W’s National Industrial Services, comments that such increases “make it apparent that confidence is building on behalf of both users and investors.”