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U.S. industrial markets maintained record pace in 2016

Author: Andrea Waitrovich

U.S. industrial markets absorbed 63.6 million square feet of space in the final quarter of 2016, which propelled net absorption for the year to a record­setting 282.9 million square feet, according to 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 million square feet) surpassing the strongest period of occupancy growth in the prior cycle, 726.8 million square feet from 1997–1999.

Jason Tolliver, head of industrial research for the Americas, says the U.S. industrial market is positioned well heading into 2017 and he expects more of the same. 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 said. “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.”

The national industrial vacancy rate for all product types continued to decline in the fourth quarter, falling 30 basis points from the prior quarter and 100 bps from the prior year to 5.5 percent. Over the past year, logistics­related warehouse vacancy has declined 130 bps, from 6.9 percent to 5.6 percent, despite the delivery of 156.8 million square feet of new speculative product.

U.S. industrial asking rents increased 3.9 percent in the fourth quarter 2016 compared to a year­ago. Industrial rents increased from the fourth quarter of 2015 to the fourth quarter of 2016 in 61 of 79 markets tracked by Cushman & Wakefield, with over a quarter of the country now reporting double­digit gains.

On the development front, 232.9 million square feet of industrial product was delivered in 2016, with 73.6 million square feet of it coming online in the fourth quarter.

In the fourth quarter of 2016, the top 10 strongest markets in terms of demand for industrial space were Dallas/Ft. Worth, with 5.3 million square feet of net absorption; Chicago, with 4.1 million square feet; Houston, with 4.1 million square feet; the Inland Empire, with 3.6 million square feet; Atlanta, with 3.5 million square feet; Memphis, with 3.0 million square feet; Stockton/Tracy, with 2.5 million square feet; Nashville, with 2 million square feet; the Pennsylvania I­81/I­78 Distribution Corridor, with 2.3 million square feet; and Columbus, with 2.1 million square feet.

Among the tightest markets in terms of overall vacancy included Los Angeles, at 1.4 percent; Orange County, at 2.0 percent; East Bay/Oakland, at 2.9 percent; Nashville, at 2.9 percent; Indianapolis, at 3.0 percent; Savannah, at 3.0 percent; Santa Clara County/San Jose, at 3.3 percent; Stockton/Tracy, at 3.4 percent; Charlotte, at 3.6 percent; and Seattle, at 3.8 percent.

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Headquartered in Newport Beach, California, BKM Capital Partners is a real estate fund manager specializing in the acquisition and improvement of value-add multi-tenant industrial properties in metro areas across the Western U.S. Combining a deep knowledge of this niche industrial product type with in-house capabilities including on-site property management, asset management, and leasing to reposition and institutionalize light industrial assets, the firm continues to build on its proven track record, generating strong results with high levels of transparency and engagement for investors. 

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BKM Management Company manages a portfolio of 8.6 million square feet of multi-tenant industrial properties for BKM Capital Partner’s private and institutional investors. With a focus on “boots on the ground” execution at the property level, BKM has in-house capabilities for both property management and leasing. The teams at the property level are focused on ensuring the tenants thrive and that the properties are managed in the most efficient way.




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