United States Industrial Outlook | Q2 2018
Leasing sentiment remains optimistic for the second half of 2018. The industrial market has seen positive rent growth and while the Class A market remains hot, there is increased competition between the Class B and Class C product in the market, which should keep most U.S. markets favoring landlords throughout the course of the year.
The U.S. under construction pipeline expanded by 3.7 percent from the previous quarter at 239.1 million square feet. Despite a robust development pipeline, strong pre-leasing activity has helped keep the vacancy levels stable.
The second quarter saw strong growth in net absorption and new deliveries and nearly 6.0 percent annual growth in rents—maintaining the positive momentum seen at the start of the year. The U.S. vacancy remained stable quarter-over-quarter at 4.8 percent and continues to be at an all-time historic low.
Spurred by an increase in absorption of warehouse space, rents inched up further reaching $5.68 p.s.f., with an annualized growth rate of 6.2 percent.
The top industrial markets of Dallas, Inland Empire, Eastern & Central Pennsylvania and Atlanta combined made up nearly a one-third of the U.S. total construction pipeline.
Each year, the top three industries accounted for over a third of total leasing activity.
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.
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Senior Director, Research
Vice President, Americas Industrial Research
Manager, Americas Industrial Research