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U.S. Industrial Report, Q3 2015

U.S. industrial market posts lowest availability since 2001

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ECONOMY

U.S. ECONOMY CONDITIONS FAVORABLE FOR INDUSTRIAL SECTOR

While the strong U.S. dollar has been somewhat of a drag for manufacturers and exporters, the entire import supply chain stands to see significant growth. The impact of the dollar was reflected in the August trade figures which saw exports of goods fall 3.5% while imports increased 1.8%. The import market is closely tied to industrial demand as growing imports increase the need for warehouse and distribution space along the entire supply chain.

DEMAND

LEASING DEMAND STRONG AND CONSISTENT

The U.S. industrial market expanded for the 22nd consecutive quarter, logging 55.6 million sq. ft. of positive net absorption in Q3 2015. This figure was down 19% from the previous quarter and 13% year-over-year. However, the year-to-date net absorption of 174.3 million sq. ft. was up over the same period in the previous year and was the most space absorbed during the first three quarters of a year since 2005. All but four markets tracked by CBRE Research saw positive demand in Q3 2015 with 21 markets posting over 1 million sq. ft. of net absorption led by the Inland Empire and Chicago with 6.2 million sq. ft. and 4.3 million sq. ft., respectively.

SUPPLY

CONSTRUCTION ACTIVITY EXPANDS TO MEET DEMAND

A total of 37.6 million sq. ft. of new supply was added nationwide in Q3 2015, the third strongest quarter in the current cycle. Eleven markets delivered over 1 million sq. ft. led by the Inland Empire, Atlanta, Dallas/Ft. Worth and Chicago–each of which delivered over 3 million sq. ft. Development activity was widespread with 85% of the markets tracked by CBRE Research completing new space in the quarter.

AVAILABILITY

NATIONWIDE AVAILABILITY HITS 9.6%—A NEW CYCLE LOW

The U.S. availability rate shed 20 basis points (bps) quarter-over-quarter to hit a new cycle low. This was the 21st consecutive quarter with an availability decline and the rate was at its lowest since Q3 2001. Availability declines were widespread with 74% of the markets tracked by CBRE Research at or below the Q2 2015 mark. San Francisco Peninsula, Orange County, Los Angeles, Cincinnati, Miami and Oakland led the way with the lowest availability rates.

RENTS

RENTS MAINTAIN PACE OF GROWTH IN Q3 2015

The average net asking rent grew 1.0% to $6.11 in Q3 2015 and was up 4.3% year-over-year. Rents have grown in 17 of the last 21 quarters and are just 4.4% below the previous cycle high. Q3 2015 average rents were at or above the previous quarter in 77% of the markets tracked by CBRE Research, with San Francisco Peninsula, Orange County, Oakland, Los Angeles and San Diego posting the strongest growth.

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