U.S. industrial market vacancy rates continue to decrease
The top four U.S. industrial markets with the highest year-over-year rent growth are Northern New Jersey, San Francisco Mid-Peninsula, Seattle and Inland Empire, according to JLL.
All four markets boasted annualized growth rates of more than 10 percent. In addition, vacancy rates hit new lows, with all four markets reporting rates under 4 percent.
Vacancy rates fell in nearly three-quarters of U.S. markets, causing overall U.S. vacancy to decline another 30 basis points to 5.3 percent. This is despite a steady flow of new construction in most markets. Markets with the least vacant space continue to be the California markets of Los Angeles, East Bay and Orange County, all reporting a vacancy of under 2.0 percent. Philadelphia, Cincinnati, Pittsburgh and Baltimore reported the highest decline in quarter-over-quarter vacancy rates, more than 100 basis points. Vacancy remained unchanged in eight markets.
According to JLL, 88 percent of the markets tracked are expected to continue to be favorable to landlords in 2017. Significant leasing in the past two quarters has led to stable vacancy rates in multiple markets. With most of the existing spaces leased out and new deliveries hitting the market at steady prelease rates, there is little to no vacant existing product available in many markets.
Total net absorption continues to outpace new deliveries. It declined from last quarter but shows an 11.9 percent year-over-year increase. Philadelphia alone absorbed nearly 8.2 million square feet, followed by Dallas and Atlanta. Those three markets contributed to 34 percent of U.S. absorption gains.
On the leasing front, responding to healthy consumer spending and growing e-commerce sales, the combined logistics and distribution and 3PL sectors accounted for 21.8 million square feet (24 percent) of the total leasing activity in the warehouse and distribution market.
The overall construction pipeline continues to grow. The U.S. Industrial market will add nearly 1 billion square feet to inventory by 2018.
Dallas, Inland Empire, Philadelphia, Denver and Atlanta account for 54 percent of this new development pipeline.
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