Demand for Warehousing Space Reaches Record-Setting Levels

Industrial markets absorbed 63.6 million square feet (MSF) of space in the final quarter of 2016, which propelled net absorption for the year to a record-setting 282.9 MSF.

The current industrial expansion is one for the record books, as reported by Cushman & Wakefield. As of January 2017, the industrial sector has registered 27 consecutive quarters of net occupancy gains, placing this expansion among the longest ever.

It is also among the strongest, with net absorption for the past three years (825.5 MSF) surpassing the strongest period of occupancy growth in the prior cycle, 726.8 MSF from 1997-1999.

The national industrial vacancy rate for all product types continued to decline in the fourth quarter, falling 30 basis points (bps) from the prior quarter and 100 bps from the prior year to 5.5%. Over the past year, logistics-related warehouse vacancy has declined 130 bps, from 6.9% to 5.6%, despite the delivery of 156.8 MSF of new speculative product.

Looking at 2017, Jason Tolliver, head of Industrial Research for the Americas at Cushman & Wakefield, says the U.S. industrial market I well positioned heading for this year. He notes that economic data reflect an increasingly confident consumer, and given solid labor markets and firmer wage growth, consumer spending should power industrial absorption, particularly for warehouse.

“When consumers are confident the industrial market benefits, and consumers ended the year upbeat with multiple measures of consumer confidence reaching cyclical highs,” Tolliver says. “Considering that consumer spending is a dominant driver of industrial demand, an optimistic U.S. consumer will be a boon to industrial leasing. It’s also worth noting that other important industrial-related indicators, such as containerized traffic flows, manufacturing indices, and business inventories demonstrate that the industrial market remains on a promising path.”

#warehousing

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