North American Industrial Highlights Q2-2013

by CoyDavidson on October 1, 2013

Still working on the Railroad “all the live-long day…”

Colliers monitors industrial property conditions in 77 North American markets from Miami to Montreal, totaling 16.1 billion square feet of inventory. Approximately 89 percent (14.4 billion square feet) of this inventory is located in the United States.

Key Takeaways

  • North America is still working on the railroad. Railroad hiring in June grew for the fifth consecutive month, the highest level of total railroad employment (164,659 jobs) since July 2008. Manufacturing and warehousing contributed a combined 26,000 jobs to the disappointing 162,000 net jobs created in August.
  • What could derail industrial’s recovery? For the ninth consecutive quarter, the aggregate North American vacancy rate declined for the 77 markets tracked by Colliers. Q2 vacancy is down 2 basis points to 8.18% (8.63% among the primary 65 U.S. markets and 4.37% among the 12 primary Canadian markets) despite the addition of 23.7 MSF of new supply.
  • Both the PMI and Rail Time Indicators show that 2H 2013 will remain strong for manufacturing and industrial activity. August’s PMI of 55.7 was the highest since June 2011, and YTD 2013.
  • Absorption remains strong despite sub-200K monthly job growth. On the heels of nearly 71 MSF of net absorption in Q4 2012, the market absorbed another 92 MSF in 1H 2013 (50.5 MSF in Q1 and 41.5 MSF in Q2.)
  • Global GDP forecasts are below trend. The IMF’s 2H 2013 GDP forecasts for both Emerging Markets and Advanced Economies appear to be flattening. Lack of robust global GDP growth may impact U.S. industrial real estate as early as 1H 2014.
  • Leadership in warehouse leasing continues to come from the inland distribution markets. Six of the top 10 MSAs for Q2 absorption were inland distribution or emerging inland port markets (Atlanta, Dallas, Denver, etc.). Los Angeles and Jacksonville, FL, were the only port markets in the top 10 for Q2 2013.
  • New supply continues to increase, but is neither excessive nor speculative. According to Dodge Pipeline, new industrial construction in Q2 increased 28% to 52 MSF. However, this level of new supply is approximately the quarterly average net absorption since Q1 2012 (45 MSF), and more than half is pre-leased or build-to-suit distribution centers for major retailers and manufacturers (Amazon, Nike, etc.)

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