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Leading Locations for 2016 Commentary: Diversity of Leading Cities Reflects Commercial Real Estate Demand

The diversity, both in terms of size and geography, of the leading cities mirrors a booming industrial expansion that has been more broad-based than previous expansions.

Q2 2016
The insight offered by Area Development’s Leading Locations is reflective of prominent trends being witnessed in the industrial market. The diversity, both in terms of size and geography, of the leading cities mirrors a booming industrial expansion that has been more broad-based than previous expansions.

The U.S. industrial market has now enjoyed 24 consecutive quarters of positive net occupancy gains, placing the current expansion among the longest — and the strongest — on record. The U.S. industrial market shed over 130 million square feet (msf) of space during the economic downturn, but has absorbed more than 900 msf during the current expansion.

Prominent economic development wins and widespread occupancy gains continue to be registered across the country. Twenty-two markets reported over one million square feet (msf) of positive net absorption during the first quarter of 2016. As a result, the industrial vacancy rate has plummeted to its lowest level of the past 30 years and currently stands at 6.1 percent. With vacancy at such low levels, there is a lack of functional, modern space on the market, and developers are responding with more speculative construction in many leading cities. Despite this uptick in speculative construction, it remains a controlled development environment and the market nationally is still well below the levels of development observed at the peak of the last cycle. From 2004 to 2009 more than 776 msf of industrial product was delivered, 27 percent more than the 566 msf of product brought online during the current expansion.

Much of what drives demand for industrial space links to the U.S. consumer, and with expected wage and labor market gains referenced in the Leading Locations report, the consumer will have the wherewithal to drive growth. We anticipate another strong year for the property market as the leading cities continue to lead the industrial market to the longest and strongest expansion on record.

Leading Locations for 2016 Results

Area Development’s research desk compiled the statistics for this report. Locations were ranked according to the methodology explained herein. This article was written by Steve Stackhouse-Kaelble, Staff Editor.
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