Report Cites Robust Industrial Sector Activity, Fundamentals

The industrial sector continues its strong run, posting “robust” occupier activity and strong fundamentals in the fourth quarter, Colliers International and CBRE said.

“[Industrial sector] occupier activity across the Unites States continues to be robust,” particularly in bulk industrial space 100,000 square feet and larger, said Colliers International National Director of Industrial Research James Breeze. He noted the average size of a bulk transaction equaled 266,000 square feet in 2018, much higher than the 242,000-square-foot average the previous year. “The increase in size range was a direct result of third-party logistics and packaging companies and automotive-related companies taking larger chunks of space compared with the same time last year,” he said.

CBRE reported fourth-quarter absorption exceeded new supply by 6.3 million square feet. “This marked the 35th consecutive quarter of positive net absorption–the longest streak since before 2001,” the firm’s U.S. Industrial & Logistics Figures report said.

The sector’s overall availability rate declined 10 basis points during the quarter to 7.0 percent, the lowest level since late 2000, CBRE said. The vacancy rate remained at 4.3 percent, maintaining its lowest level since at least 2002.

Breeze predicted transaction volume for bulk industrial space will remain robust over the next 12 months due to occupiers’ increasing need for both regional and “final-mile” distribution centers. “While third-party logistics and retail-related distribution volume will remain robust, look for strong growth in the food, beverage and pet supply industry, as many of these occupiers are looking to expand and modernize their distribution and manufacturing networks,” he said. “Population growth will keep occupiers in all industries looking at space in the southern and western portions of the U.S. while improvements and expansions of inland and coastal logistics hubs as well as strong domestic manufacturing in the northeast and Midwest will keep demand strong in these regions for the foreseeable future.”

CBRE said major supply-chain demand drivers including consumer spending, business inventories and industrial production have all remained steady and contribute to demand for indurtrial real estate. “With the unemployment rate at a multi-decade low, consumer confidence is near its highest level since 2004,” the report said.

But the sector faces some significant risks, CBRE noted. “While issues related to tariffs and trade have shown no short-term impact on the industrial and logistics market, there is concern that over the long term these could create some market volatility,” the report said.