C&W: ‘Robust’ Industrial Sector

Despite recent economic shocks including Brexit and the Chinese slowdown, the U.S. economy continues to perform–which leads to “robust” industrial sector performance, reported Cushman & Wakefield, New York.

“Nothing is more crucial to industrial property demand than jobs,” C&W’s Industrial MarketBeat report said. 

C&W noted that the U.S. has created 2.5 million new non-farm payroll jobs over the last 12 months. “Those strong job gains have extended to industries that are among the heaviest users of industrial space.” 

Warehouse and storage companies added 54,000 new jobs over the past 12 months and manufacturers added 14,000 new jobs in June alone, C&W said. “That is a notable development, given that manufacturing employment has been one of the clearest weak spots in the labor market since the beginning of the year,” the report said.     

As a result, U.S. industrial markets absorbed more than 70 million square feet of space in the second quarter, up 6 percent year-over year and a record for the sector, C&W said. “Demand during the second quarter continued to be impressive and broad-based,” the report said, noting that 11 markets registered more than two million square feet of occupancy gains. 

Every industrial segment grew, C&W reported. Logistics-related warehousing absorbed 114 million square feet, manufacturing registered 11 MSF of growth and flex assets saw 8 MSF of net occupancy gains.

“Healthy demand from logistics and distribution users combined with supply constraints continue to fuel rent growth,” C&W said. “In many markets, industrial rents are currently at historic highs and on a national level the U.S. is witnessing rental rate appreciation for every industrial product type.”

C&W said it expects the sector to continue to prosper going forward. “Much of what drives demand for logistics space links to the U.S. consumer, and with expected wage and labor market gains, consumption will drive industrial growth,” the report said. “U.S. imports, which are closely tied to warehousing demand, will continue to expand on the back of solid domestic demand and subdued import prices. Exports will be modest.”

This should lead net absorption to exceed 220 million square feet for the year, C&W said, which should hold the national vacancy rate steady at less than 6 percent.

“Strong tenant activity and supply constraints will fuel rent growth,” the report said. “Gains will continue to permeate all [industrial] product types.”