Download - CBRE U.S. Industrial Marketview
CBRE Global Research and Consulting
U.S. Industrial MarketView Q2 2012
LEASE RATE $5.46
NET ABSORPTION26.4 MSF
THE FIGHT FOR CLASS A SPACE ACCELERATES
CONSTRUCTION COMPLETIONS5.2 MSF
AVAILABILITY RATE13.2%
Executive Summary
• Despitealacklustermacroeconomicenvironment,industrialleasingvelocityhasimprovedasuserstrytolock-incurrentlyfavorablerentandleaseterms.
• Industrialdemandwillsoftenoverthenextseveralquarters,inlinewithslowingU.S.andglobalgrowth,afalteringmanufacturingsectorandshrinkinginternationaltrade.
• UserdemandforClassAspacewillcontinuetodrivedownavailabilityrates,leadingtoupwardpressureonleaserates.Constructionactivityisback,includingbothbuild-to-suitandspeculativeprojectsacrosssomeofthenation’slargestindustrialmarkets.
• LowinterestratesandthelimitedsupplyofClassAindustrialproductforsalewillcontinuetodrivecapratesdowninthenearterm.
• IndustrialrealestateperformancecontinuestorecoverassignaledbytheNCREIFPropertyIndex.Industrialrealestatedeliveredanannualizedtotalreturnof13.4%duringQ12012,inlinewiththeoverallindex.
INDUSTRIAL LEASING ACTIVITY: More active than underlying economic trends would suggestDespiteanumberofmajorglobaleconomicheadwindsandaU.S.economythatisfastlosingmomentum,industrialleasingremainedsurprisinglyactiveacrossmostmarketsduringthepastquarter.TheU.S.industrialmarketcontinuedtoshowsignsofrecovery,withthenationalindustrialavailabilityratedroppingby20basispoints(bps)to13.2%inthesecondquarterof2012.Occupiershavebeguntomoveoffthesidelines,seekinglongertermleasestotakeadvantageoflowercompetitiverents,whichareexpectedtorise.“Extendandblend”usertransactionscontinue,butlandlordsaregettingpricingpowerbackasindustrialmarketconditionsimprove.Anumberofindustrialusersarealsoconsideringtheownershipoptiongivenrecord-lowinterestrates.
Warehousedemandwasthemaindriverforspaceslargerthan100,000sq.ft.
Tenantsareupgrading,relocatingfromClassBtoClassAspace,butoptionsaregettingtighter.Manufacturingspacerequirementswerealsoontherise,particularlyinthesoutheasternandnortheasternU.S.markets,dueinparttotheU.S.“manufacturingrenaissance.”
Theprospectforindustrialdemandoverthenextfewmonthswilllikelybeflat,however,givenweakeningheadlineeconomicindicators.U.S.economicdatahasbeendisappointing,leadingtofurtherdownwardrevisionstogrowth.Theoveralleconomy,consumerspending,internationaltradeandthebroadermanufacturingsectorareamongthekeydriversofindustrialdemand,withallpointingtoasoftpatchthroughatleastthenextquarter.
U.S. In
du
strial | M
arketV
iewQ
2 2
012
2
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
2012
Q3
2012
Q4
2013
Q1
2013
Q2
2013
Q3
2013
Q4Consumer Spending Real GDP
Annual Percent Change (%)
Forecast
1%
0%
1%
2%
3%
4%
5%
6%
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
Total Trade (L) Growth % (R)
Total Trade ($ Billions) Annual Percent Change (%)
2010
Q120
10Q2
2010
Q320
10Q4
2011
Q120
11Q2
2011
Q320
11Q4
2012
Q120
12Q2
2012
Q320
12Q4
2013
Q120
13Q2
2013
Q320
13Q4
Forecast
Source: IHS Global Insight, Interim Forecast, July 2012 Source: IHS Global Insight, Interim Forecast, July 2012
Source: Institute for Supply Management
M1 20
09
M3 20
09
M5 20
09
M7 20
09
M9 20
09
M11
2009
M1 2
010
M3 2
010
M5 20
10
M7 2
010
M9 2
010
M11 2
010
M1 20
11
M3 2
011
M5 2
011
M7 2
011
M9 2
011
M11 2
011
M1 2
012
M3 20
12
M5 2
0120
10
20
30
40
50
60
70
TheU.S.economyandindustrialsectorhavebeguntofeelthebruntoftheslowdowninglobalgrowth,whichoriginatedinEuropebuthasnowspreadtoLatinAmericaandAsia.U.S.trade,whichisthesumofimportsandexports,slowedduringthesecondquarterandisexpectedtoactuallydeclineinthethirdquarter.
Figure 1: U.S. Economy Downshifts Figure 2: U.S. International Trade Activity
Figure 3: ISM Surprised to the Downside (ISM Purchasing Managers’ Index [Diffusion index, SA])
U.S. In
du
strial | M
arketV
iewQ
2 2
012
3
facilitatethetransportationofoilandgasforexports.
Theexpansionofe-retailerscontinuestofueltheneedforwarehouseanddistributionspace.Amazon,theleaderine-retailing,continuestopushforlargerfacilitiesclosetolargemetropolitanareastodecreasedeliverytimes.Astraditionalretailersgrowtheire-retailerstrategies,itwilllikelyincreasedemandforwarehousespaceandshrinktheneedfortraditionalbricks-and-mortarretail,whichistypically10to20timesthecostofawarehousefacility.
TheISMmanufacturingindex,agreatdemand-sideproxyforindustrialrealestate,cameinwellbelowexpectations.TheJuneISMmanufacturingindexslumpedto49.7,thefirstsub-50readingsinceJuly2009.Theforward-lookingdetailsofthesurveywerealsoweak,withbothnewordersandexportorderscominginbelow50asglobalheadwindsappeartobeexertinggreaterpressureontheU.S.industrialsector.ThedipintheISMsuggeststhatthedownshiftinthemanufacturingsectormaybeaccelerating.Themanufacturingdatahadbeenweak,butuntilnowtheISMindexhadlookedbetterthaneithermanufacturingoutputordurablegoodsorders.TheISMsurvey’sdetailssuggestthatthefactoryslowdownwillcontinuethroughatleastthenextfewmonths.
Domesticdemandforlocalgoodshasalsodecreasedoverthepastfewmonthsduetothecontinuedstrugglesinthehousingsectorandweaker-than-anticipatedjobgrowth.AsilverliningforconsumerspendingandtheU.S.economy,however,hasbeenthedeclineincommodityandenergypricesglobally.IntheU.S.,itisestimatedthataone-centdeclineinretailgasolinepricesequatestoroughly$1billionineconomy-widetaxcuts.Thelowerpriceofoilwillprovideafloorunderconsumerspendingandlikelycausedomesticconsumptiontoincreasemoderatelyasconsumersnowhaveahigherlevelofdisposableincome.Thechallengeremainswithbothconsumerandbusinessconfidencelevels;thishasresultedincautiousspendingandinvestmentfrombothsides.
Longer-term,however,weexpectthedriversofindustrialdemandtoshifttoamorepositivetrajectorygivensecularchangesintheglobaleconomy.U.S.manufacturingcompaniescontinuetobenefitfromtherelativelylowervalueoftheU.S.dollar.AcceleratingwageratesinAsiaandhighertransportationcostsarealsofosteringa“manufacturingrenaissance”intheU.S.Overthepastfewmonthstherehavebeenafew
announcementsofnewmanufacturingplants,especiallyinthetransportationsector,inthesouthernU.S.markets.Thesecompanieshavebeendrawnbycompetitivelaborcosts,theavailabilityofrealestateatcompetitiverates,andtheavailabilityofaskilledandhighlyproductiveworkforce.Partofthere-shoringofmanufacturingtotheU.S.hasbeendrivenbytheneedsoftheconsumers,thetimelydeliveryofproducttotheconsumerandthedemandforcustomproductssuchasaspecificcolorordesign.Althoughwiththerecentincreaseindemand,manufacturerswillincreasetheutilizationratesofexistingfacilitiesbeforeseekingadditionalspace.Recentannouncementsinclude:
•Airbus’newassemblyplant—tobebuiltinMobile,Alabama—isscheduledtobecompletedin2015,a$600millioninvestment.
•Fordisadding1,800jobsinLouisville,Kentucky,addingathirdshiftinthefallof2012.
•MagnaSeatingofAmerica,Inc.isbuildinga140,000-sq.-ft.plantinShepherdsville,Kentucky,adding450newjobsin2012.
•AsahiForge,aJapaneseautomotivesupplier,isaddingasecondmanufacturingplantinRichmond,Kentucky,in2012.
•NissanwillincreaseproductionforthenewSentra,adding1,000newjobsinMississippi.
•GMtoadd800jobs,addingathirdshifttoitstruckplantinTexasin2012.
Thedomesticenergysectorishavingamarginalinfluenceontheindustrialsectoraswell,butthiswilllikelychangewiththefurtherdevelopmentinshale,asexistingplantsareadaptedtoaccommodatetheprocessingandtransportofthenewmaterials.Newplantsarealsobeingbuiltinportsto
U.S. In
du
strial | M
arketV
iewQ
2 2
012
4
Source: CBRE Econometric Advisors
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
-100
-80
-60
-40
-20
0
20
40
60
80
2007
Q2
2007
Q3
2007
Q4
2008
Q1
2008
Q2
2008
Q3
2008
Q4
2009
Q1
2009
Q2
2009
Q3
2009
Q4
2010
Q1
2010
Q2
2010
Q3
2010
Q4
2011
Q1
2011
Q2
2011
Q3
2011
Q4
2012
Q1
2012
Q2
Completions and Absorption (MSF) Availability Rate (%)
Completions (L) Absorption (L) Availability Rate (R)
Despitethelacklustereconomicenvironment,industrialspacedemandhasbeenrelativelystable.Industrialuserscontinuetofavorhigherquality,newerspacethatcanincreaseproductivityandlowertherealestatecost.Companiesarereviewingeverythingfromtheircurrentlocations,technology,andplantlayoutofequipmenttoincreaseproductionefficiencies.Insomecasesoccupiersaremovingintonewerfacilitiesandreducingspace,comparedtotheirpriorpremises,duetotheincreaseinstoragecapacitywithhigherstackingcapabilityandamoreefficientplantlayout.Thisisdrivingthedemandbytenantstotradeuptonewer,moremodernClassAindustrialfacilities.Thesebuildingstypicallyhavehigherceilings,super-flatfloorsandhavebeenbuiltinthelasttenyears.Evenwiththenationalindustrial
availabilityrateat13.2%,thescarcityofavailablespaceinsuchbuildingsmeansthatClassAindustrialavailabilitiescontinuetoshrink,insomecasesattheexpenseofolderindustrialbuildings.
USERS UPGRADING SPACE
Figure 4: U.S. Industrial Supply and Demand
U.S. In
du
strial | M
arketV
iewQ
2 2
012
5
Thelackofavailableproductrequiredbyusersisplacingupwardpressureonleaseratesforthebestspace;however,leaseratesforaverageproductremainflat.Inprimarymarkets,rentsfornewerfacilitiesareapproachingreplacementlevelsandspurringnewdevelopment.Newconstructioncontinuestoincreaseacrosskeymarketsduetothedropinavailabilityratesin2012andthelackofnewer,ClassAindustrialspace.Newconstructionfor2012hastotalednearly
11millionsq.ft.,andisontracktoexceedtheindustrialnewsupplycompletedin2011.MostofthisnewspaceconsistsofClassAdesign-buildprojects,althoughanincreaseinspeculativeconstructionprojectsacrossthecountryisemerging.PocketsofspeculativeconstructionactivityareoccurringinNorthernVirginia,Indianapolis,theInlandEmpire,OrangeCounty,SaltLakeCityandAtlanta.Manyofthesemarketshavesingle-digit
industrialavailabilityrates,withavailableClassAindustrialspacevirtuallynon-existent.Duetotheshortsupplyofnewproduct,manyoftheseprojectsareoftenpre-leased.InAtlanta,despitemanyavailablewarehouseoptions,anew630,000-sq.-ft.speculativeprojectisunderconstruction,underscoringthedemandforstate-of-the-artlargewarehouseanddistributionspace.
HERE COMES THE SUPPLY
ThePanamaCanalhasalsoimpactedtheU.S.industrialmarketwithrespecttocompetitionbetweenEastCoastversusWestCoastports.TheracecontinuesintheeasternU.S.gatewaymarketssuchasNewYork,NewJersey,Norfolk,andMiamitoinvestcapitalinpreparingforthecompletionofthePanamaCanalexpansion.Mostoftheinvestmentcontinuestobefordredgingprojects,whichwillallowtheportstoaccommodatelargershipsaswellastheneedtoincreasetheclearanceheightofbridges.Theonlyportthatcancurrently
accommodatethepost-panamaxshipisNorfolk.ThePortAuthorityofNewYorkandNewJerseyhascommitted$1billiontoraisetheBayonneBridge,whichconnectsBayonne,NewJersey,withStatenIsland,NewYork,by64feettoallowlargershipstopass.PortspendingwillincreaseaswenearthecompletionofthePanamaCanalexpansionin2014.
Theinvestmentbenefitsforeasternportswillbeminimalintheshortterm,asthetransportationinfrastructureforgoods
inlandremainsinwesternports.Inthenearterm,itremainsmorecosteffectiveandquickerforshipperstooffloadinwesternportsandtransportgoodsviarailtomajormarketssuchasChicago.EasternportswilllikelybenefitfromincreasedcontainertrafficfromshipsusingtheSuezCanalandexpandingmarketssuchasBraziltothesouth.
THE PANAMA CANAL FACTOR
U.S. In
du
strial | M
arketV
iewQ
2 2
012
6
Source: Real Capital Analytics
7.0%
7.2%
7.4%
7.6%
7.8%
8.0%
8.2%
8.4%
8.6%
8.8%
$0
$2
$4
$6
$8
$10
$12
Jan
2010
Feb
Mar
Apr
May
Jun Jul
Aug
Sep Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun Jul
Aug
Sep Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
2011 2012
Industrial Transaction Volume ($ Billions) Cap Rates (%)
Industrial Transactions (L) Average Cap Rates (R)
Domesticandcross-borderinvestorscontinuetocloselymonitorindustrialsectorfundamentalsgivenfavorableleasingvelocityandthelackofClassAoptionsfornewerspace.Strongerrentalrecoveryisbeingusedinunderwritingindustrialacquisitions.Risingsalesvolumereflectsthesurgeininvestorinterest.Theindustrialcapitalmarket
trendssignalimprovingtransactionvolume,accordingtoRealCapitalAnalytics.Overthefirstfivemonthsof2012,industrialtransactionstotaled$10.3billion,a13%increaseoveryear-agolevels.Interestinindustrialpropertyhasresurfaced,asinvestorsincreasinglyeyeportfoliotransactions.Institutionalinvestors,however,continue
tofocusonClassAand/orvalue-addpropertiesinprimarymarkets.Record-lowinterestrates,combinedwithgreaterinstitutionalcapitalthanavailablesupplyofpropertiesforsale,continuetodrivedowncaprates,especiallyforbetterassets.
IndustrialrealestateperformancecontinuestorecoverassignaledbytheNCREIFPropertyIndex.Industrialrealestatedeliveredanannualizedtotalreturnof13.4%duringQ12012,inlinewiththeoverallindex.Thiswasthesecondhighestreturn,trailingonlythemulti-housingsector.Muchofthereturnhasbeenduetoasurgeinappreciationreturnsthathavebeendrivenbycapratecompressionearlierthisyear.The
westernregionoftheU.S.alsodominatesthemarketvalueofindustrialpropertiesintheNPIandassuch,thesolidperformanceofindustrialmarketsinthewestcontinuetodriveoverallindustrialperformance.
INDUSTRIAL CAPITAL MARKETS
Figure 5: Institutional Capital Targeting Industrial Assets
U.S. In
du
strial | M
arketV
iew
U.S. In
du
strial | M
arketV
iew
Q2 2
012
Q2 2
012
87Source: CBRE Research
Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and
completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist.
SEATTLE249,079 SF10.3%$6.49
SAN JOSE243,759 SF13.5%$11.42
PHOENIX275,326 SF15.0%$6.84
DENVER223,929 SF7.8%$6.21
CHICAGO1,188,170 SF9.7%$3.99
COLUMBUS208,190 SF12.6%$3.04
INDIANAPOLIS238,848 SF9.1%$4.28
DETROIT511,766 SF11.9%$4.47CLEVELAND290,783 SF8.3%$4.59
MILWAUKEE226,563 SF
11.8%$3.76
ST. LOUIS222,407 SF
14.9%$4.34
ATLANTA551,590 SF18.8%$3.29
NEW JERSEYCENTRAL395,459 SF10.4%$4.37
PHILADELPHIA401,433 SF12.5%$3.86
BALTIMORE153,169 SF15.5%$4.79
NEW JERSEYNORTHERN409,442 SF10.1%$6.11
MIAMI211,710 SF9.3%$4.68
HOUSTON448,767 SF9.2%$3.91
SAN DIEGO200,759 SF
15.0%$10.32
LOSANGELES
993,073 SF6.8%$6.52
INLANDEMPIRE403,354 SF11.8%$4.08
ORANGECOUNTY252,457 SF7.4%$7.56
DALLAS/FT. WORTH721,121 SF13.4%$3.70
KANSASCITY233,654 SF12.3%$4.53
MINNEAPOLIS/ST. PAUL
326,839 SF10.2%$4.70
CINCINNATI267,221 SF9.5%$3.79
SEATTLE249,079 SF10.3%$6.49
SAN JOSE243,759 SF13.5%$11.42
PHOENIX275,326 SF15.0%$6.84
DENVER223,929 SF7.8%$6.21
CHICAGO1,188,170 SF9.7%$3.99
COLUMBUS208,190 SF12.6%$3.04
INDIANAPOLIS238,848 SF9.1%$4.28
DETROIT511,766 SF11.9%$4.47CLEVELAND290,783 SF8.3%$4.59
MILWAUKEE226,563 SF
11.8%$3.76
ST. LOUIS222,407 SF
14.9%$4.34
ATLANTA551,590 SF18.8%$3.29
NEW JERSEYCENTRAL395,459 SF10.4%$4.37
PHILADELPHIA401,433 SF12.5%$3.86
BALTIMORE153,169 SF15.5%$4.79
NEW JERSEYNORTHERN409,442 SF10.1%$6.11
MIAMI211,710 SF9.3%$4.68
HOUSTON448,767 SF9.2%$3.91
SAN DIEGO200,759 SF
15.0%$10.32
LOSANGELES
993,073 SF6.8%$6.52
INLANDEMPIRE403,354 SF11.8%$4.08
ORANGECOUNTY252,457 SF7.4%$7.56
DALLAS/FT. WORTH721,121 SF13.4%$3.70
KANSASCITY233,654 SF12.3%$4.53
MINNEAPOLIS/ST. PAUL
326,839 SF10.2%$4.70
CINCINNATI267,221 SF9.5%$3.79
1,000,000,000 SF
200,000,000 SF
MARKETSTOCK (SF x 1000)AVAILABILITY RATENNN ASKING RENT
*The arrows indicate a trend and do not represent a positive or negative value for the underlying statistic (e.g., net absorption could be negative, but still represent a positive trend over the time period).
Figure 6: 25 Largest Industrial Markets - Q2 2012
The national availability rate masks regional performance. According to second quarter figures, west coast markets such as Los Angeles (6.8%) and Orange County (7.4%) are reporting lower industrial availability rates than any other market. By contrast, east coast markets such as Stamford (25.9%), Boston (20.9%) and Atlanta (18.8%) report among the highest industrial availability rates in the nation. Industrial markets in older east coast cities suffer from a higher degree of older and obsolete product.
From a regional perspective, the largest increases in absorption occurred in Chicago, the Inland Empire and New Jersey, respectively, and were mostly driven by the demand in Class A industrial warehouse and distribution space.
REGIONAL OVERVIEW: SUPER-REGIONAL DISTRIBUTION CENTERS OUTPERFORM
Q2 2012 Current QoQ YoY
Availability Rate 13.2% i i
Lease Rate $5.46 h h
Net Absorption* 26.4 MSF i i
Construction Completions 5.2 MSF i i
NATIONAL QUICK STATS
U.S. In
du
strial | M
arketV
iewQ
2 2
012
9
IndustrialavailabilityinCentralNewJerseyremainedflatat10.4%,whereasavailabilitydecreased40bpsto10.1%inNorthernNewJerseyduringthesameperiod.TheaverageaskingleaserateforindustrialpropertyinNewJerseyincreasedduringthesecondquarterforthefirsttimeinthepastfouryears.Thestate’saskingleaserateisstill$1.07belowitspeakratesetinQ22008,althoughthatgapisexpectedtotighten,especiallyforClassAindustrialspace.
CentralNewJerseycontinuestoattractthemajorityofdemandfornewspace,mostlyconsistingofthirdpartylogisticsaswellasconsumerproductscompanies.ActivityattheportsofNew
Threenewconstructionprojectsamountingto1.17millionsq.ft.brokegroundduringQ22012.Morethanhalfofthesenewstartsarebeingbuiltonspeculativedevelopmentandtherecentincreaseinnewconstructionispushinglandpriceshigher.
YorkandNewJerseyremainsstrong,addingtothedemandforwarehouseanddistributionspace.InthenorthernportionofNewJersey,theMeadowlandssubmarketcontinuestoattractsignificanttenantdemandwithitshighconcentrationofindustrialspaceincloseproximitytoNewYorkCity.
Ascomparedtojustafewquartersago,industrialconstructionactivityinNewJerseyispickingup,duetoincreasingdemandandlimitednumberofoptionsforlarge,modernindustrialusers.FourindustrialbuildingswerecompletedinQ22012:threebuild-to-suitprojectstotaling652,155sq.ft.andone101,600-sq.-ft.speculativeproject.
NEW JERSEY
GREATER LOS ANGELES
TheGreaterLosAngelesindustrialavailabilityratefellto6.8%,a10bpsdecreasefromthepreviousquarter;thisrepresentsoneofthelowestratesintheU.S.Theincreasedvolumeofportactivityhascreatedanevengreaterneedfordistributionspaceforlargerandmoremoderndistributionfacilitiesofover100,000sq.ft.Inaddition,therehasbeenanincreaseindemandforindustrialspaceunder50,000sq.ft.,mainlycomingfromsmallstart-upcompanies.
TheInlandEmpireisdominatingmarketactivityinSouthernCalifornia,aslarge
ClassAdistributioncentersareinhighdemandbylogisticscompaniesandretailerslookingtoexpanddistributioncapabilities.Activitylevelsareveryhighinthe100,000-sq.-ft.category.ThebulkofconstructionactivityinSouthernCaliforniaisalsooccurringintheInlandEmpire,with7.3millionsq.ft.currentlyunderconstruction(thehighestfiguresincepre-recession),ofwhich38%—or2.8millionsq.ft.—isspeculativeconstruction.
InLosAngelesCounty,Commerce,SouthBayandSanFernandohavebeenparticularlystrong,withdemandfrom
bothmanufacturingcompaniesandwholesalers.Themostactivesizerangeisbetween50,000sq.ft.and75,000sq.ft.—infact,approximately63%ofQ22012activitywasbetween10,000sq.ft.and100,000sq.ft.AlthoughconstructionisfairlyactiveinLosAngelesCounty,with1.8millionsq.ft.,themarkethasnotexperiencedthesamegrowththattheInlandEmpireiswitnessing.However,duringthenextsixto12months,thelackofClassAindustrialspacewilllikelyspuranincreasedvolumeofconstruction,includingspeculativeprojects.
U.S. In
du
strial | M
arketV
iewQ
2 2
012
10
Source: CBRE Research
*Percentage point change Source: CBRE Research
DALLAS
CHICAGO
ATLANTA
TheindustrialavailabilityrateremainedflatinDallasat13.4%forQ22012.Mostoftherecentdemandhasbeenfromretailersforwarehouseanddistributionbuildings.HomeDepotrecentlyoccupiedalargeblockofspace,andKohl’swillbeopeningafacilitylaterthisyear.Themostactivesubmarket,GreatSouthwest/Arlington,postedthelargestamountofabsorptioninthefirsthalfof2012,at2.8millionsq.ft.total.
Chicago’sindustrialmarketcontinuestorecover,withtheavailabilityratedecreasingto9.7%,achangeof40bpsfromthepreviousquarter.Threeoutofthetop10dealswerepaper-relatedcompanies(KimberlyClarkat716,318sq.ft.;DomtarPaperwith453,364sq.ft.;andInternationalPaperat316,000sq.ft.).Machinery,metalanddurablegoodsalsohadstrongshowingsduringthesecondquarter.TheFarSWsuburbanmarketinChicago(alsoknownastheI-55corridor)dominatedleasingactivityduringQ22012,withmorethan1.7millionsq.ft.ofactivity.Thisaccountedfor24%ofallleasingactivitythatoccurredinQ22012.Thissubmarkethasnewerbigboxproduct,lowerleaseratesandeasyaccesstoexpressways,whichwillkeepitintenants’favorfortheforeseeablefuture.
TheindustrialavailabilityrateinAtlantaincreasedto18.8%,adifferenceof20bpsfromthepreviousquarter.Demandforwarehouseanddistributionspacefromthird-partylogisticsfirmshasincreased.BulkwarehouseClassAspaceinthecoresubmarketsofNortheastandSouthAtlantacontinuestobethemostsought-after.Thedemand
Leaseratesarestartingtoincrease,primarilyduetoashrinkingavailabilityofspace.Mostnewconstructionhasconsistedofbuild-to-suitactivity.Twospeculativeprojectswererecentlyannounced:approximately661,000sq.ft.inSouthDallasfromProLogis;and529,000sq.ft.inNorthwestDallasfromIDI.
Fornewindustrialsupply,twoprojectsbrokegroundinthesecondquarter:a239,000-sq.-ft.build-to-suitforFedEx,anda604,000-sq.-ft.speculativeproject,bothofwhichareintheFarSWsuburbansubmarket.Inaddition,therearesixprojectscurrentlyunderconstructiontotaling1.9millionsq.ft.,ofwhichtwoarespeculativeprojectswhiletheotherfourarebuild-to-suit.ThelasttimeChicagohadthismuchspeculativeconstructionwasin2008.AnincreaseindemandiscausingrentalratestoincreasemarginallywhilelandlordsareofferinglesstenantincentivesandmovingrentsupforClassAindustrialbuildings.
formodernindustrialbuildingshascausedolderproductintheFultonindustrialmarkettolagduetotheageandobsolescenceofolderindustrialbuildings.Newconstructionhasbeenlimiteduntilnow,withmostlybuild-to-suitactivitytakingplaceinsouthAtlanta.
Figure 7: Industrial Market Snapshot
Lowest Availability Rates (%)LOS ANGELES METRO 6.8ORANGE COUNTY 7.4WESTCHESTER COUNTY 7.7DENVER 7.8CLEVELAND 8.3
Highest Availability Rates (%)STAMFORD 25.9BOSTON 20.9AUSTIN 19.4ATLANTA 18.8WALNUT CREEK 18.5
Figure 8: Largest Quarterly Decreases and Increases*
Decreases in AvailabilityCOLUMBUS -2.9DETROIT -1.9ORLANDO -1.8HARTFORD -1.0BALTIMORE & STAMFORD -0.9
Increases in AvailabilityWESTCHESTER COUNTY 1.7WALNUT CREEK 1.3SAN ANTONIO 1.2JACKSONVILLE 1.0LONG ISLAND 0.8
U.S. In
du
strial | M
arketV
iewQ
2 2
012
11
* Maryland Suburban and Virginia Northern represent Washington, DC area.U.S. national figures provided by CBRE Econometric Advisors (CBRE EA), all other figures compiled by CBRE Research
Figure 9: Industrial Availability - Q2 2012
NNN Asking Rate ($) Availability Rate (%)Market Region Size Rank Q2 12 Q2 12 Q1 12 Q2 11BALTIMORE 29 4.79 15.5 16.4 17.8BOSTON 30 6.45 20.9 21.3 23.1HARTFORD 41 4.76 14.9 15.9 17.2LONG ISLAND 44 8.39 14.3 13.5 15.0MARYLAND SUBURBAN* 39 8.06 15.6 16.2 16.8NEW JERSEY CENTRAL 10 4.37 10.4 10.4 12.1NEW JERSEY NORTHERN 7 6.11 10.1 10.5 10.0NORFOLK 38 4.53 12.6 12.7 11.4PHILADELPHIA 9 3.86 12.5 12.7 12.7STAMFORD 50 7.00 25.9 26.8 21.1VIRGINIA NORTHERN* 42 10.22 15.3 14.7 15.9WESTCHESTER COUNTY 51 10.74 7.7 6.0 4.5East 12.9 13.2 13.7CHICAGO 1 3.99 9.7 10.1 10.5CINCINNATI 14 3.79 9.5 10.1 10.2CLEVELAND 12 4.59 8.3 8.5 9.9COLUMBUS 24 3.04 12.6 15.5 16.1DETROIT 5 4.47 11.9 13.8 15.1INDIANAPOLIS 18 4.28 9.1 9.3 10.9KANSAS CITY 19 4.53 12.3 12.3 12.3MILWAUKEE 20 3.76 11.8 11.1 12.1MINNEAPOLIS/ST. PAUL 11 4.70 10.2 10.9 11.5ST. LOUIS 22 4.34 14.9 15.1 15.0Midwest 10.7 11.3 12.0ATLANTA 4 3.29 18.8 18.6 19.2AUSTIN 43 6.84 19.4 19.1 22.0DALLAS/FT. WORTH 3 3.70 13.4 13.4 14.7FT. LAUDERDALE 37 6.63 11.6 11.1 13.4HOUSTON 6 3.91 9.2 9.3 10.3JACKSONVILLE 36 3.98 16.5 15.5 14.7MIAMI 23 4.68 9.3 9.2 10.5NASHVILLE 28 3.78 15.6 15.3 15.1ORLANDO 34 5.00 17.5 19.3 19.5PALM BEACH 45 6.44 12.8 13.3 13.7SAN ANTONIO 48 4.88 16.7 15.5 17.8TAMPA 32 5.02 13.4 13.5 13.3South 14.0 13.9 14.9ALBUQUERQUE 46 6.50 12.0 11.7 11.4DENVER 21 6.21 7.8 8.4 9.2INLAND EMPIRE 8 4.08 11.8 12.5 12.2LAS VEGAS 35 5.74 13.5 13.2 11.4LOS ANGELES METRO 2 6.52 6.8 6.9 7.4OAKLAND 31 5.28 9.2 9.4 10.3ORANGE COUNTY 15 7.56 7.4 7.8 8.5PHOENIX 13 6.84 15.0 15.4 16.2PORTLAND 26 4.44 9.7 9.6 10.5SACRAMENTO 27 5.16 16.8 16.7 16.0SALT LAKE CITY 33 4.80 8.7 9.4 9.3SAN DIEGO 25 10.32 15.0 15.4 16.2SAN FRANCISCO PENINSULA 40 18.12 9.5 9.9 9.3SAN JOSE 17 11.42 13.5 13.7 15.2SEATTLE 16 6.49 10.3 10.7 11.8TUCSON 47 6.65 15.5 15.5 12.7WALNUT CREEK 49 7.20 18.5 17.2 17.5West 10.4 10.6 11.1UNITED STATES 13.2 13.4 14.0
U.S. In
du
strial | M
arketV
iewQ
2 2
012
12
Global ReSeaRch and conSUltInG This report was prepared by the CBRE U.S. Research Team which forms part of CBRE Global Research and Consulting – a network of preeminent researchers and consultants who collaborate to provide real estate market research, econometric forecasting and consulting solutions to real estate investors and occupiers around the globe.
dISclaIMeR
Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we
have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and
completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be
reproduced without prior written permission of the CBRE Global Chief Economist.
FolloW US
GOOGLE+ FACEBOOK TWITTER
Edward J. Schreyer, SIOR Executive Managing Director Brokerage Services, Americas CBRE t: +1 214 863 3042 e: [email protected]
Asieh Mansour, Ph.D. Head of Research, Americas and Senior Managing Director CBRE Global Research and Consulting t: +1 415 772 0258 e: [email protected]
James Costello Managing Director, Head of Americas Investment, Consulting and Strategy, CBRE Global Research and Consulting t: +1 617 912 5326 e: [email protected]
Raymond Wong Managing Director, COO and Industrial Specialist, Americas Research, CBRE Global Research and Consulting t: +1 416 815 2353 e: [email protected]
Heather Edmonds Director, Western U.S. Research Division, CBRE Global Research and Consulting
t: +1 909 418 2090 e: [email protected]
Pamela Murphy Senior Vice President, Eastern and Central U.S. Research Divisions, CBRE Global Research and Consulting t: +1 212 984 8004 e: [email protected]
Andrea Walker Director Head of Americas Research Publications and Data, CBRE Global Research and Consulting t: +1 919 376 8608 e: [email protected]
contactsFor more information about this U.S. Industrial MarketView, please contact:
Follow Asieh on Twitter: @AsiehMansourCRE