North American Industrial Highlights – 4Q 2012
Colliers monitors industrial property conditions in 75 North American markets from Miami to Montreal, totaling 16.1 billion square feet of inventory. Approximately 90 percent (14.4 billion square feet) of this inventory is located in the United States.
The West and Midwest regions constitute approximately half of the North American industrial warehouse space (8.0 billion square feet), and also accounted for approximately half of the annual net leasing activity in North America. The South is the next largest region, with 4.2 billion square feet of industrial warehouse space, or 26 percent of the North American inventory. The expansion of the Panama Canal, and the addition of at least five more Panamax-ready ports to the East and Gulf coasts, will only enhance the market share of key inland and port distribution markets in the Southeast and Southwest by 2015.
2012 finished with progress on all fronts:
- North American and U.S. industrial vacancy rates below 9.0 percent (8.42% and 8.92%, respectively)
- Q4 was the best quarter since Q3 2007 and the financial crisis, with $36.9 billion in transactions, making investor demand for industrial real estate second only to multifamily
- Lease activity surged at year-end, with 45% of 2012’s 163.5 MSF of net absorption coming in Q4
Following four consecutive quarters of improving demand metrics with limited new supply, the overall picture is of a property type in balance. As a result, new construction is both warranted and feasible.
- Q4 was the best quarter for industrial warehouse property transactions since Q3 2007. Industrial warehouse property transactions were up 4% in 2012 to $36.9 billion. Approximately 37% of these transactions ($13.5 billion) occurred in Q4 2012
- 2012 net absorption in Colliers’ 75 primary North American industrial markets surpassed 160 million square feet. 70.9 MSF was absorbed in Q4, or 40% of the 2012 total. Approximately 90% of Q4 leasing activity occurred in the U.S.
- 30% of Q4 North American net absorption occurred in just five MSAs: Toronto (4.95 MSF), Detroit (4.7 MSF), Los Angeles – Inland Empire (4.4 MSF), Dallas/Ft. Worth (3.2 MSF), and Memphis (2.9 MSF). All five markets are home to the nation’s busiest intermodal rail operations, with the exception of Chicago.
- The North American industrial vacancy rate dropped 30 basis points in Q4 to end 2012 below 9.0%. The North American vacancy rate ended 2012 at 8.42%, and the U.S. vacancy rate at 8.92%.
- Ten major North American markets have vacancy rates at or below 6.5 percent. Montreal (4.3%) and Calgary (5.0%) in Canada; Orange County, CA (4.9%), Omaha (5.1%), Houston (5.2%), Indianapolis (5.3%), Long Island, NY (5.6%), Seattle (5.8%), Los Angeles – Inland Empire (6.5%) and Milwaukee (6.5%) in the U.S.
- Four of the top 5 U.S. cities for in investment were port cities, according to AFIRE (the Association for Foreign Investment in Real Estate): New York, San Francisco, Houston and Boston. Houston was also in the top five globally for the first time.
- Recovery in housing is an overlooked industrial demand driver that will gain additional traction in 2013.