BOSTON, Oct. 29 /PRNewswire/ — The national industrial vacancy rate edged up yet again during the third quarter of 2009, hitting 10.5 percent. This represents a new high for the decade and marks the eighth consecutive quarter of increasing vacancy, according to the third quarter industrial report from Colliers International, the global real estate services firm. The cyclical low for industrial vacancies had previously stood at 7.9 percent; and from one year ago, the U.S. industrial vacancy rate has increased by 1.9 percentage points.
Industrial net absorption for the quarter measured negative 47.3 million square feet (msf). Although this is clearly not an encouraging sign, Q3 occupied space contracted by less than it did in Q1 and Q2, respectively. Year-to-date industrial absorption in the U.S. stands at negative 132.4 msf. Three markets in particular contributed to the YTD negative absorption, including Chicago (negative 18.4 msf), Los Angeles Basin (negative 20.4 msf) and San Jose/Silicon Valley (negative 9.6 msf).
The amount of warehouse construction completions declined again in Q3, in tandem with ongoing weak industrial market conditions, with just 11.9 msf delivered in the July through September period. This is the lowest number for new construction delivery Colliers has on record. Indeed, quarterly new construction has fallen steadily as 2009 has progressed.
In terms of U.S. warehouses under construction, during the third quarter, this metric was down as well. Approximately 22.4 msf of new development was underway at the end of Q3, scheduled to be delivered to the market during Q4’09 and into 2010. Like new completions, this construction underway number is the lowest Colliers has on record, and well beneath the 154 msf of construction underway just two years ago.
Warehouse rent patterns mirrored those of absorption mentioned above. Although the average rental rate for industrial space did fall from $5.09 per square foot (psf) during Q2’09 to $5.04 psf in the third quarter, this fractional decrease of 0.9 percent was the least rents had dropped (psf) in the past year. Bulk warehouse space and tech/R&D space showed larger decreases in rental rates, while flex/service space fared better than traditional warehouse rents.
“The U.S. warehouse market showed ongoing weakness in Q3, with vacancies up, absorptions negative and construction completions/construction underway at the lowest levels our researchers have ever witnessed – which is no surprise given the ongoing recession and stagnating economic landscape,” reported Ross Moore, executive vice president and director of market & economic research for Colliers International. “Although a few bright spots are evident, including a pickup in leasing activity and an easing of absorption losses quarter-over-quarter, we predict ‘more of the same’ for the industrial space market until well into 2010. From our vantage point, warehouse tenants will sit tight and make do with their current space – avoiding expansion and new lease signings – until more signs of a sustainable recovery are evident.