North American Industrial Outlook
Colliers International monitors industrial market conditions in 77 North American markets. North American industrial vacancy continues to decline in markets tracked by Colliers, inching toward 7.5 percent at the beginning of 2014. In Q4 2013, the North American industrial vacancy rate declined another 20 basis points from 7.89 percent to 7.69 percent. Vacancy for just the primary 65 U.S. markets declined from 8.33 percent to 8.08 percent. The decline in the overall North American industrial vacancy rate came primarily from strong absorption in the United States; in fact, the vacancy rate in Canada increased slightly from 4.25 percent to 4.41 percent, due to new supply.
Q4 2014 absorption was positive across all U.S. regions, and was strongest in the South (17.9 MSF) and West (16.1 MSF), followed by the Midwest (11.6 MSF) and Northeast (6.8 MSF). Q4 was another quarter with more than 50 MSF of net absorption (52.5 MSF). North American CY2013 absorption fell just shy of 200 MSF (199 MSF). Canadian markets accounted for only 2.0 MSF of Q4’s 54.5 MSF net absorption.
Key Takeaways from the report:
- E-commerce is inextricably linking retail and industrial real estate. Transportation efficiencies are driving the where, what, and how much of industrial warehouse space.
- 3-D printing will further accelerate the convergence of retail and warehouse real estate. As more and more materials are made available for 3-D printing applications, a broader array of manufactured goods can be made “just in time,” in proximity to customers, with less need to store and distribute goods. How much of what we buy at a store could be made on demand and on site, to exact specifications, without the need for a finished product supply chain or distribution centers? Look out, Amazon!
- North American industrial vacancy continues to decline – down another 20 basis points to 7.69% based on strong U.S. absorption.
- U.S. industrial warehouse vacancy is lowest in the Western region at 6.50%, and second-lowest in the Midwest region at 8.01%, followed by the South (8.98%) and Northeast (9.28%).
- Q4 2013 absorption was positive across all U.S. regions, and strongest in the South (17.9 MSF) and West (16.1 MSF). The Top 5 MSAs for CY2013 absorption: Dallas, LA – Inland Empire, Chicago, Atlanta, and the Port of Los Angeles. Inland markets continue to outpace port markets in absorption.
- Still no signs of overbuilding risk on the horizon. Although North America added 29.0 MSF of new supply in Q4 2013 (vs. 21.1 MSF in Q3), only 45% of that new supply was speculative. In CY2013, the 65 major U.S. industrial markets absorbed more than twice the new supply added (188 MSF absorbed, vs. just 80 MSF of new supply).