United States Industrial Outlook | Q4 2017
Spurred by an
increase in leasing activity for warehouse
space, U.S. industrial rents inched up further,
reaching $5.50 per square foot, with a
year-over-year growth of 5.4 percent.
As top logistics markets continue to
operate at a sub-3.0 percent
vacancy rate, we expect
continued competition for quality space and
added pressure on rents through 2018.
New deliveries for 2017 was 232.7 million square feet. For the fourth quarter alone, roughly 68 million square feet delivered (30% of the annual total). Pre-leasing overall was down slightly to 47.4 percent, but spec deliveries made up 75.5 percent of all new completions, and were preleased at a healthy rate again in the quarter.
After a slowdown in absorption rates in Q2 and Q3, strong pre-leasing activity in new development through the course of the year resulted in a robust quarter for net absorption for U.S. markets.
While leasing volumes remain strong, there is an escalation of deal volumes in the 100k–250k s.f. and the 250k—500k s.f. size category. With delivery times tightening companies are pushing into the "last-mile" to be closer to consumers in more cities—leading to an increased demand for small- and mid-sized spaces.
Spec development continues to grow at record pace—responding to the need for modern bulk distribution space. Construction levels were still high in the fourth quarter, but with vacancy continuing to remain low on the heels of continued strong demand—competition amongst larger block occupiers for available spaces remains elevated.
Total inventory tops 12.5 b.s.f. led by Chicago, Los Angeles and Philadelphia/Harrisburg.
Average asking rents jumped to $5.25 per square foot. Northern New Jersey saw the highest year-over-year rent growth, followed by San Francisco Mid-Peninsula, Seattle and Inland
Annual net absorption grew 11.9% to 58.4 m.s.f. Philadelphia, Dallas and Atlanta led absorption, contributing 34% alone.
Vacancy rates fell in nearly three-quarters of U.S. markets, dropping overall U.S. vacancy to 5.3%. California continues to have the tightest markets in the country, led by Los Angeles (0.9%), East Bay (1.2%) and Orange County (1.5%).
206.7 m.s.f. is currently under construction, and an estimated 247.2 m.s.f. is expected to deliver through year end.
View interactive version with additional market details.
Managing Director, Industrial & Logistics Research
Vice President, Americas Industrial Research
Manager, Americas Industrial Research