The U.S. economy showed various signs of weakening in the third quarter, but the market for industrial real estate appears to be the picture of health.
Colliers International said third-quarter vacancies came in at 8.2 percent, down from the 8.3 percent of the second quarter and the 8.7 percent seen in the year-ago quarter. Results for the latest quarter were in-line with what industry watchers had expected, helped in part by continued steady demand.
“The third quarter held few surprises for the industrial market,” said Ross Moore, senior VP and director of market and economic research at Colliers. “We anticipated an increase in completions and felt demand would stay strong, despite a slowdown in manufacturing and the overall economy.”
Moore said rents did increase slightly more than expected, but Colliers’ full-year forecast of a 10 percent increase is still viable. Warehouse rents rose by 3.6 percent in the quarter, about the same as in the second, while year-over-year, rents are up 7.7 percent.
Colliers said only a handful of markets are forecasting demand to drop in the current quarter, with the majority expecting leasing markets to remain in good health.
Development projects completed during the third quarter increased to 49.4 million square feet, compared with 38.2 msf in the second quarter. Industrial space under construction fell by 5.2 msf to 121 msf, versus 127.1 msf during the second quarter. That was the first decrease in construction activity since the fourth quarter of 2004, Colliers said.
The top-ranked metropolitan warehouse space markets (ranked by Sept. 30 ascending vacancy rate) were Honolulu, Los Angeles, West Palm Beach, FL, Bakersfield, CA, and Las Vegas.
Colliers is a partnership of independently owned commercial real estate firms.