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CBRE Report: U.S. Industrial Market Balanced, Production Peaks
Demand for industrial space exceeded total new deliveries in 2017, though Q4 2017 demand did not keep pace with new supply delivered. The industrial market’s availability rate remained steady for the sixth consecutive quarter at 7.4%, the lowest level since Q1 2001, according to the latest Industrial & Logistics report from CBRE.
Net absorption totaled 44.4 million square feet in Q4, which marked 31 consecutive quarters of positive demand. Total net absorption for the year exceeded 200 million square feet for the fifth year in a row. The five-year average of 256.9 million square feet is the most since CBRE began tracking the stat in 1989, notes CBRE industrial researcher David Egan.
New supply totaling 51.7 million square feet was delivered in Q4, which was on par with the previous quarter. The 2017 total of 195.3 million square feet was up 2% over 2016, and was the largest delivery total of this cycle. The under-construction pipeline of 236.8 million square feet in Q4 was up 2.2% over the previous quarter, which suggests that the near-term delivery figures should be in line with the most recent quarters.
Though supply and demand are in balance, net asking rents still grew slightly (0.6%) in Q4 to $6.92-per-square-foot. Rent growth for the year was strong at 5.3%. Asking rents reached an all-time high in Q3 2016, and have set a new record in each subsequent quarter.
Egan notes in the report that the major drivers of industrial demand, consumer consumption and manufacturing, were both well-positioned at year’s end. The U.S. unemployment rate was 4.1%, its lowest level in 17 years. Consumer confidence has risen to its highest level since 2004, as consumers’ expectations for future wage growth is at its highest point in three years. That rise in consumption has pushed industrial production to the highest peak on record in December.
CBRE also found in its Global Industrial & Logistics Prime Yields report that e-commerce growth and demand for last-mile logistics, combined with an abundance of institutional capital in the global market, is driving increased investment in the industrial sector. The logistics sector is poised for continued growth amid rapid e-commerce expansion and positive market fundamentals across all regions. This is expected to continue driving global demand and investment in the sector in 2018.
For comments, questions or concerns, please contact Dennis Kaiser
