Foreign investment increases 30% in industrial real estate

BY ANDREA WAITROVICH

Foreign investment in U.S. industrial real estate jumped 30 percent to $1.3 billion during the first quarter of 2017 over the same period a year before, according to Avison Young.

Canada is ranked the number one buyer for U.S. industrial real estate, totaling $831.1 million during the first quarter 2017.

Chinese investors emerged as a top player in the U.S. industrial real estate, according to a Bisnow article. The amount of capital being deployed by Chinese investors totaled $284.9 million during the first quarter 2017, compared to $5.2 million in completed deals during the first quarter 2016, a 540 percent increase year-to-year. Demand for quality space and e-commerce will fuel industrial market.

Landlord-favorable conditions persisted in the U.S. during the 12-month period ending March 31, 2017. Overall vacancy averaged 5.3 percent in the markets tracked by Avison Young, down from 5.9 percent one year earlier. Leasing fundamentals in nearly every market demonstrated strength and improvement. Even markets, such as Houston, that were cause for concern in 2016 because of volatile energy prices reported positive take-up, robust

deliveries and controlled new construction. There is a supply shortage in some markets, resulting in rental rates growing precipitously.

The next cycle for the industrial market could prove to be interesting as data centers, technology and distribution help drive vacancy to new lows and functionally obsolete buildings are converted to other uses. Lack of available supply, the emphasis on the last mile in the supply chain, higher clear heights and land constraints are widespread and common issues.

Seventeen of the 41 markets tracked by Avison Young posted below-average vacancy. The lowest rates in the country were recorded in San Mateo (36 million square feet/1.8 percent),

Orange County (218 million square feet/2 percent) and Miami (182 million square feet/2.8 percent).

U.S. markets posted 232 million square feet of net absorption during the 12 months ending March 31, 2017 – an increase of 12 million square feet over the previous 12-month period. Six markets gained 10 million square feet or more of occupancy: Dallas (27 million square feet), Los Angeles (26 million square feet), Atlanta (18 million square feet), Chicago (17million square feet), Detroit (14 million square feet) and New Jersey (10 million square feet).

During the first quarter there were modest levels of construction completions. Dallas delivered 25.5 million square feet. In Los Angeles, 24.7 million square feet came online, followed by Atlanta (20.3 million square feet), Chicago (20 million square feet) and Houston (13.6 million square feet).

Altogether, 181 million square feet was underway in the United States as of first-quarter 2017, with a 37 percent prelease rate, pointing to the demand for modern facilities in distribution corridors.