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U.S. Industrial - Q4 2017

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Another Banner Year: U.S. industrial markets absorbed 63.3 million square feet (msf) in the fourth quarter of 2017, boosting net occupancy gains for the year to over 246.3 msf. The U.S. industrial market has now recorded over 240 msf of absorption for four consecutive years—the strongest run on record. The national industrial vacancy rate held at 5.1% for all product types—the lowest rate on record—with market conditions tightening slightly in the Midwest and South. The greatest growth markets in 2017 were Dallas/Ft Worth, Atlanta, the Inland Empire, Chicago and the Pennsylvania I-81/I-78 Distribution Corridor, and together they accounted for 38% of overall U.S. net absorption.

Firing on All Cylinders: Every industrial segment remained in growth mode. Through Q4 2017, warehouse product posted 224.9 msf of net absorption, manufacturing registered 10.2 msf of growth, flex occupancy grew by 7.2 msf and high technology occupancy increased by 2.4 msf. The current industrial expansion is one for the record book. As of January 2018, the industrial sector has registered 31 consecutive quarters of net occupancy gains—the longest expansion ever. It is also among the strongest with net absorption since 2010 surpassing 1.4 trillion square feet.

Tight Conditions: At 5.1%, the U.S. industrial vacancy rate is a full 330 basis points (bps) below the 10-year historical average of 8.4% for all product types. The warehouse market remains tight with vacancy tracking at 5.2% in Q4 2017. Over the past year, logistics-related vacancy has declined 50 bps (from 5.7% to 5.2%) despite the delivery of 168.6 msf of new speculative warehouse product. Strikingly, warehouse vacancy rates remain below prior cycle lows in many industrial markets, with conditions tightening further in Q4 2017 as rates track below 5% in nearly half of all U.S. markets. At year-end 2017, the tightest U.S. markets included Savannah, Los Angeles, Orange County, the San Francisco Peninsula, and Oakland/East Bay, all of which have vacancy rates at 3% or below.

Source : Cushman & Wakefield

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