U.S. Industrial Market Sees Signs of Improvement
5 Aug, 2010, New York
Cushman & Wakefield today released its midyear report for the U.S. industrial market, which shows leasing activity has increased 25.8 percent year-over-year, while the overall vacancy rate has declined for the first time in 11 quarters.
Overall leasing activity for industrial product in the U.S. totaled 126.6 million square feet at midyear 2010, up 25.8 million square feet from 100.8 million square feet at midyear 2009. Of 33 industrial markets tracked by Cushman & Wakefield, 21 charted a year-over-year increase in leasing activity, with Greater Los Angeles (6.7 million square foot increase), Atlanta (2.1 million square foot increase) and the Inland Empire (2 million square foot increase) reporting the largest increases in activity.
The overall vacancy rate for the U.S. industrial market totaled 10.6 percent at midyear 2010, down from its recent peak of 10.8 recorded at the end of the first quarter of 2010. It was the first time the industrial vacancy rate had declined in 11 quarters, when overall vacancy measured 7.1 percent at the end of the third quarter of 2007. While some markets - including Boston (1.2 percentage point quarterly increase) and Northern Virginia (0.4 percentage point quarterly increase) - recorded higher vacancy rates than the previous quarter, 18 of the 34 markets tracked by Cushman & Wakefield saw quarterly declines in their vacancy rates, while three of the markets remained unchanged from last quarter.
"Fundamentals in the U.S. industrial market have undoubtedly improved," said Maria Sicola, executive managing director and head of Americas Research for Cushman & Wakefield. "This quarter's decrease in vacancy - the first in nearly three years - is a telling sign that the U.S. industrial market is on its way to a modest recovery."
The year-to-date absorption rate, a measure which indicates the net change in occupied space, also began to improve during the first half of 2010. Year-to-date absorption was negative 12.9 million square feet, an 86.9 percent improvement in absorption from the negative 80.2 million square feet recorded at midyear 2009.
New supply of industrial product was limited during the first half of 2010, with 8.2 million square feet of construction completions year-to-date, an 80.9 decrease from the 43 million square feet of construction added to the market in the first half of 2009, and the lowest amount of construction completions since Cushman & Wakefield began tracking the U.S. industrial market. Industrial product under construction at midyear 2010 totaled 11.9 million square feet, down from the 23 million square feet under construction at midyear 2009, and also the lowest total ever recorded.
"With construction levels at historical lows, we expect the U.S. industrial market to continue to strengthen through the remainder of 2010," said Jim Dieter, executive vice president of Cushman & Wakefield's U.S. Industrial Services.
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