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Cushman & Wakefield Reports on Continuing Momentum for Industrial Real Estate Markets

07/15/2016
Cushman & Wakefield has announced that U.S. industrial markets absorbed a record-setting 70.1 million square feet (msf) of space in the second quarter of 2016, up 6.0 percent from the same period a year ago, and resulting in year-to-date absorption of 132.2 msf. Remarkably, 38 U.S. markets saw more than one million square feet of absorption during Q2 2016, and 11 markets actually registered more than two million square feet of quarterly net occupancy growth.

Q2 2016 was the 25th consecutive quarter of net occupancy gains for the industrial sector, with the current quarter’s absorption reaching a new cyclical high.

The top 10 strongest markets for Q2 2016 in terms of demand for industrial space were the Inland Empire, with 8.2 msf of absorption; Chicago (7.3 msf); Dallas/Ft. Worth (4.5 msf); Atlanta (3.6 msf); Greenville, South Carolina (3.6 msf); the Pennsylvania I-81/I-78 distribution corridor (3.6 msf); Indianapolis (2.7 msf); Phoenix (2.2 msf); Central New Jersey (2.2 msf); and the East Bay (2.2 msf).

While we are starting to hear speculation that the market somehow feels toppy, or mature, there remains no evidence that the positive cycle for industrial is nearing its end. John Morris, Executive Managing Director of Logistics & Industrial Services for the Americas, Cushman & Wakefield
Commenting on these latest numbers, Cushman & Wakefield’s Chief Economist Kevin Thorpe says, “We expect to see some headwinds form in manufacturing and exporting created by the stronger U.S. dollar, but other important industrial-related indicators, such as containerized traffic flows, transportation indices, and business inventories, demonstrate that the industrial market remains on a robust path.” He continues, “In fact, the recent European-driven volatility will likely create renewed tailwinds for the U.S. property markets in the form of lower gas prices, stronger foreign capital investments, and a more real-estate-friendly Fed policy than most had expected entering into this year.”

With strong tenant activity and supply constraints, rents continue to grow. U.S. industrial rents increased 4.1 percent in Q2 2016 compared to a year ago. In fact, industrial rents increased in 68 of 79 markets tracked by Cushman & Wakefield from Q2 2015 to Q2 2016, with more than 25 percent of the U.S. now reporting double-digit gains. In many markets industrial rents are now at historic highs; on a national level, the U.S. is witnessing rental rate appreciation for every industrial product type.

John Morris, Cushman & Wakefield’s Executive Managing Director of Logistics & Industrial Services for the Americas, also expects continued growth for the industrial sector: “The roll continues for the industrial real estate market. While we are starting to hear speculation that the market somehow feels toppy, or mature, there remains no evidence that the positive cycle for industrial is nearing its end. The warehouse market continues to exceed expectations, seemingly unfazed by what is happening globally.”

Morris believes that at some point, of course, the market will slow, but he does not see that on the current horizon. “We remain incredibly busy and significantly optimistic,” Morris concludes.

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