CBRE report cites 25 straight quarters of declines for industrial real estate availability

According to CBRE data, industrial availability fell to 8.8. percent in the first quarter, which marked a decrease of 20 basis points from the first quarter’s 9.0 for its lowest reading going back to the second quarter of 2001.

By ·

When anything occurs for more than 25 quarters, or six years and three months, one can make the argument that whatever is going on for that long is more than a trend. And based on data recently issued by commercial real estate firm CBRE, the trend of industrial real estate becoming harder to occupy due to limited availability, largely due to increasing e-commerce-based demand for warehouse space, remains fully intact.

According to CBRE data, industrial availability fell to 8.8. percent in the first quarter, which marked a decrease of 20 basis points from the first quarter’s 9.0 for its lowest reading going back to the second quarter of 2001. 

CBRE also found that of the 57 major U.S. markets it tracks, 37 registered declines in their availability rate in the second quarter, up slightly from the first quarter’s 35.  What’s more, with e-commerce expected to continue to see robust demand, CBRE Chief Economist for the Americas Jeffrey Havsy said occupants will build out their North American Distribution networks that will, in turn, lead to increases in lease rates while driving developers to complete around the same amount of industrial space in the 57 major U.S. markets in 2016 as 2015, which came in at 150.5 million square feet. That amount of square-feet pales in comparison to the ten-year high of 213.5 million in 2006.

Looking at the 57 U.S. markets it tracks, CBRE said that 13 of those markets saw increases in availability of space, due to the delivery of newly constructed building that have not yet been leased. Some of those marketed included: Houston, Denver, California’s Inland Empire, and Cleveland, among others. Some of the markets seeing declines were Tampa, Jacksonville, and Detroit.

In an interview, Havsy said that it’s not surprising that there are few signs of stress in the industrial market’s fundamentals, despite an uncertain economic and geopolitical outlook, as CBRE stated in its research accompanying this data.

“The underlying fundamentals in the economy remain strong,” he explained. “Job growth was robust in June. We had a strong retail sales number today for June. The headlines are much worse than the data. The economy is in good (not great) shape.”

But should the economy tail off, Havsy cautioned that rent growth would in all likelihood slow down in tandem with the economy.

The ongoing advent of e-commerce has, according to CBRE, pushed industrial availability to what it described as “unusual lows” as demand grows for facilities to be equipped to handle same-day delivery fulfillment and reverse logistics, too. And coupled with the strong U.S. dollar compared to other currencies, which it expects to continue to increase U.S. imports, CBRE noted that is expected to drive additional demand for industrial real estate space. 

When asked if the ever-increasing rental activity by e-commerce occupants is surprising in any way or if it is viewed as the “new normal” at all, Havsy said that like all things real estate, rents will not grow forever.

“Cycles do appear longer and demand less elastic than the past,” he said.  “As tenants put more expensive and complex systems in warehouses, they are less likely to move to save ’ a nickel’. This stickiness causes demand to be more inelastic and allows landlords to raise rents quicker than in the past. That bein said, real estate is still cyclical and the fundamentals will change. This will cause rents to stop growing or even decline as they have in every other previous cycle.”

About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.

Latest Whitepaper
2019 Top 5 Trends of Enterprise Labeling
This year’s sixth annual Top 5 Trends in Enterprise Labeling report outlines significant shifts in labeling that are impacting businesses and global supply chains at an unprecedented level.
Download Today!
From the April 2019 Logistics Management Magazine Issue
This month we roll out the findings of Logistics Management’s 35th Annual Salary Survey, a research project conducted by American Truck Research Group (PRG) that serves as the foundation of our best-read editorial feature of our publishing year. And it’s no surprise that the full study is also the most downloaded PRG report.
Next-Generation Data Capture Emerges
2019 Air Cargo Roundtable: Volumes and pricing gathering speed
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly newsletter!
Latest Webcast
Case Study: Enabling the Autonomous Supply Chain
During this webinar Nucleus Research and One Network will dissect a global company's strategy to leverage a multi-party network to enable the autonomous supply chain.
Register Today!
35th Annual Salary Survey: Compensation matters more than ever
While job satisfaction remains the primary reason for today’s logistics managers to stay with one...
2019 Rate Outlook: Pressure Builds
In 2019, the world economy will enter a third straight year of broad-based growth, but many...

2019 Transportation Management Systems (TMS) Market Update: Keeping pace with the times
The transportation management systems market is growing right along with the number of challenges...
The Logistics News that Shaped 2018
Every year at this time, group news editor Jeff Berman combs through the mountain of news that was...

hidden colors 2 documentary full movie