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News release

Chicago

Airport Industrial Real Estate Still Preparing for Take Off as Cargo Volumes Slow

Airport real estate poised to rebound in late 2011


CHICAGO, Oct. 12, 2010 — Research by Jones Lang LaSalle says that while the economic downturn caused global cargo levels to drop and the demand for logistics space around the nation’s airports to decrease, it also reports that airport real estate is still poised for take off in 2011. As the recession recedes, the air cargo industry has experienced improvement in volumes, mainly driven by inventory restocking but this has yet to result in any push in space absorption around airports, says the firm’s Ports Airports and Global Infrastructure (PAGI) report.

“It’s no secret that the decrease in global cargo volumes has negatively affected the demand for logistics and warehouse space around airports,” said John Carver, head of the PAGI group at Jones Lang LaSalle. “These statistics have not helped vacancy rates at the top U.S. airports, which are up an aggregate of 80 basis points year-over-year, keeping 2010 net absorption in negative territory.  That said, there has been some improvement this year and we expect that by late 2011the market will be ready to take off again.”

“In August 2009, we saw a bounce in global cargo volumes on the back of re-stocking.  However figures just released from the International Air Transportation Association (IATA) confirm that they have fallen again, dampening the possible growth that could bring the market back to life this year,” said Carver.

Top U.S. Airport Markets

Some airport markets such as JKF in New York and Newark in New Jersey have remained buoyant due to their proximity to dense populations and low vacancy rates, says the report which analyzed 11 of the top airport hubs in the country. 

JFK has the lowest vacancy rates at 3.3 percent but it is the smallest market surveyed.  Other dominant markets include Anchorage with 4.5 percent, LAX at 5.5 percent and Newark at 7.8 percent.  This in turn follows with the highest asking rents starting with JFK at $13.30 per square foot (psf), Anchorage at $11.28 psf and LAX at $10.59 psf.
 
Memphis is the world’s leading airport in terms of metric tones of container traffic according to the Airports Council International; it is followed by the Asian airports such as Hong Kong, Shanghai and Incheon in South Korea. 

The real estate surrounding Memphis airport remains flat with vacancy rates at 15 percent, relatively unchanged from this time last year and low rental rates at $2.18 psf. While Memphis is the world’s leading cargo airport it was heavily affected by the fall in cargo traffic. However, with cargo volumes healthier than in previous quarters, heavy investment in intermodals and some strong recent leasing activity, the industrial real estate market surrounding the airport is expected to begin to rebound in the next 3–6 months.

Meanwhile the Dallas Forth Worth airport has experienced industrial vacancy increase with current figures standing at 19.4 percent. This is the highest figure of all the 11 markets analyzed in the study and is due to an abundance of new development rather than a lack of industrial real estate demand.

The Future

“The most successful airports in the future will likely expand their focus to include more multi-modal capabilities and partner to create new development that spotlights integrated logistics or distribution functionality,” said Aaron Ahlburn who heads industrial research at Jones Lang LaSalle.  “It is expected that vacancy levels are cresting in major U.S. airport industrial markets, but true growth may not be realized until late 2011 if consumer demand falters and air cargo numbers continue to fall. Regardless, 2010 is proving to be much better than 2009, with more indicators pointing toward long-term optimism even if the short run outlook is somewhat unstable.”

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About the PAGI report

Jones Lang LaSalle’s proprietary Port, Airport and Global Infrastructure report provides a detailed analysis of the current and future impact of economic development initiatives, cargo volumes, trade flows and shipping patterns on industrial real estate surrounding the nation’s top seaports and airports.  This is one of the only reports of its kind – drawing together trends in trade, supply chains and industrial real estate.

About Jones Lang LaSalle’s Logistics and Industrial Services

Jones Lang LaSalle’s Logistics and Industrial Services team include more than 220 professionals covering the top 50 industrial markets in the United States, Canada and Mexico, and an additional 330 more at work in major industrial markets around the globe.  In 2009, Jones Lang LaSalle’s Logistics and Industrial Services team completed some 1,307 transactions comprising more than 115 million square feet of space at a value in excess of $2.6 billion.
 
About Jones Lang LaSalle

Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2009 global revenue of $2.5 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.6 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with approximately $38 billion of assets under management. For further information, visit our website, www.joneslanglasalle.com.