Research - APRIL 18, 2017

U.S. industrial construction surges in Q1

by Jody Barhanovich

Approximately 45 million square feet of U.S. industrial real estate space was completed in first quarter 2017, the highest first-quarter level since 2008, according to CBRE Econometric Advisors.

The surge in construction is due to broad-based tenant demand, which is being supported by a number of positive economic drivers, which include international trade, manufacturing and consumers.

In international trade, February’s goods trade deficit declined to $64.8 billion, reversing a large increase in January. CBRE predicts that although trade will likely be a net negative for U.S. GDP growth in first quarter 2017, the wider trade deficit is a plus for the industrial market since imports generate more aggregate warehouse demand than exports.

In regards to manufacturing, factory orders increased by 1 percent in February, the third straight month of growth, according to the CBRE. Inventories and shipments also continued to climb, a positive sign that warehouses will remain full in the coming months, according to CBRE.

Retail sales were also solid in the first two months of 2017, particularly for non-store retailers, who are growing sales at a 13 percent annual rate. However, real personal consumption expenditures slowed dramatically in the first two months of the year.

CBRE is optimistic that the industrial market will remain relatively balanced in the coming quarters despite a flush construction pipeline.

In recent industrial property transactions, Brookfield Asset Management acquired a portfolio of industrial and office properties located across 12 states for a total of $854.5 million in early April. TA Realty sold the portfolio to Brookfield on behalf of its TA Realty Associates Fund IX, an industrial fund that is part of TA Realty’s flagship fund series that focuses on creating diversified real estate portfolios.

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