It remains a seller's market for US warehouse and distribution space, with availability levels falling for a historically long stretch.
Supply Chain Digest Says... |
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According the new Q3 market analysis from real estate firm CBRE, its Industrial Sum of Markets measure dropped by 11 basis points1 (bps) in Q3 2018, to 7.1%, Wthe latest data point down 33 basis points, year over year.
But the real news is the amazing stretch of the bull market for DC space. As shown in the graphic below, overall US availability has declined year over year for an unprecedented 33 consecutive quarters. You have to go back to early 2010 to find an increase in availability levels – and that obviously gives market power to builders and lessors and pushes lease rates higher.
CBRE says preliminary data shows net absorption at 63 million sq. ft. in Q3 compared and completions at nearly 50 million sq. ft. In other words, about 13 million more square feet of DC space was leased in the quarter than new space was built.
Thirty-seven of the metro markets CBRE tracks recorded declines in availability during the quarter, while 19 recorded increases and eight went unchanged.
"The underlying conditions for the industrial sector remain solid, with demand continuing to outpace supply," CBRE says, adding that "The demand-supply gap has widened over the past two quarters—an indication of the industrial sector's late-cycle strength."
The modestly good news for shippers? "The supply pipeline also remains strong, so the availability rate should flatten as supply catches up to demand and then gradually tick up over the medium term."
CBRE also notes that with the exception of Q1 2018, completions have fallen between 45 MSF and 60 MSF eight times in the past nine quarters. It says that Historically, whenever quarterly completions have consistently registered in this range, the availability rate has flattened out for some time, before then increasing.
Which market areas saw availability rates fall the most in Q3? CBRE calls out New Haven (-320 bps), Jacksonville (-270), Trenton (-250 bps), Sacramento (-200 bps), South Central PA (-180) and Kansas City (-160).
Meanwhile, Hartford (180), San Antonio (160), Dallas (150), Ventura (130), Oakland (80), Denver (70) and San Francisco (50) saw notable year-over-year increases in availability.
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The highest availability rates in the markets CBRE follows was in Wilmington, DE (14.3%), followed by nearby Baltimore (11.3%), then Trenton, NJ (10.9%), Memphis (10.5%), and Stamford, CT (10.3%).
The market with the least availability was Honolulu (3.7%), followed by Portland (4.3%), Cincinnati (4.4%), Los Angeles (4.5%), Orange County (5.1%) and Jacksonville (5.3%).
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