405 Million Square Feet Under Construction is Highest Level Ever Recorded
May 17, 2019
Houston – According to Transwestern’s national industrial market report for the first quarter of 2019, the overall vacancy rate for industrial buildings ticked up for the first time in nine years, to 4.8%. Despite the increase, due in large part to speculative construction projects delivered to the market, net absorption remained positive as nearly half of the new product was preleased.
“As anticipated, a pause in the leasing market occured during the first quarter,” said Matt Dolly, Director of Research in New Jersey. “Big-box users are bypassing existing older product that remains available for lease, instead targeting speculative real estate development, which is spreading to secondary markets. Keep in perspective that we are dealing with small changes to numbers that have been on a steep upward trajectory for five years.”
Nearly 3 billion square feet of space has been leased since 2010, offsetting the 1.9 billion square feet of new product delivered to the market during the same period. An additional 405 million square feet of industrial product was under construction at the end of the quarter, the highest level on record. In some cases, tenants are signing leases while projects are in the planning stages, even before construction begins.
Asking rents for industrial space continue to increase nationally, with 41 of the 47 markets tracked by Transwestern experiencing year-over-year growth, driving the overall average up to $6.28 per square foot. This is due in large part to demand, but also because new construction naturally commands higher prices, especially taking into account increased labor costs in a tight job market.
“We are seeing some retailers that are leasing space in primary markets recouping rent increases by raising product prices,” Dolly said. “However, since consumer spending remains strong thanks to a thriving U.S. economy, we anticipate continued slow and steady growth for the industrial market throughout the remainder of 2019.”
Download the full National Industrial Market report at: http://twurls.com/1q19-us-industrial
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