JLL: ‘Great Expectations’ for Industrial Real Estate

Industrial real estate occupiers and investors alike experienced a record-breaking year in 2015 and can expect this trend to continue well into 2016, said JLL, Chicago.

“Last year was like no other year on record, with historically high amounts of capital flowing into prime logistics real estate in key markets around the world, and there continues to be robust leasing by corporate tenants,” said Craig Meyer, President of Industrial Brokerage and Capital Markets with JLL.

Cushman & Wakefield, New York, reported brisk industrial sector leasing velocity and tight vacancy in late 2015, which put upward pressure on rents in most markets. Rents grew fastest in primary industrial hubs and secondary distribution markets, Cushman & Wakefield Global Chief Economist Kevin Thorpe said in the firm’s fourth-quarter MarketBeat report.

Thorpe said late 2015 represented the 23rd consecutive quarter of net occupancy growth–the longest streak in more than two decades.

“Job gains in manufacturing and in the transportation/warehousing sectors in December indicate a positive trajectory, while the anticipated increase in consumer demand bodes well for future demand,” Thorpe said. “As a result, we expect net absorption will continue to outpace new development for one more year, vacancy will continue to tighten and rents will continue to appreciate in most markets.”

Meyer agreed that the sector’s recent rental growth should continue throughout this year and into 2017. He said that while 2016 investor and occupier demand may not reach last year’s highs, “all forecasts predict that we will have another great year overall.”

JLL said most participants it surveyed predicted that industrial rents will peak in late 2016.

“Taking a look at the expectations for broad rental growth, institutional investor interest and the demand for new Class A product, we can predict 2016 to be a promising year for corporate occupiers, investors and developers around the globe,” Meyer said. “We are seeing investor demand being spread more evenly throughout the three regions [Europe-Middle East-Africa, Asia-Pacific and the Americas], indicating a very strong ‘steady state’ in the coming months.”