Los Angeles, December 6, 2012– The two-plus year-old recovery of U.S. industrial real estate markets will extend into 2013, CBRE Group, Inc. forecasts, as modest economic growth and increased global trade through the U.S. will help sustain demand improvements for warehouse and distribution space.
CBRE expects the national industrial availability1 rate to fall to 12.2% in 2013 and 11.3% by the end of 2014. These rates will decline from 13.1% in Q3 2012. The national industrial availability rate peaked at 14.6% in Q2 2010.
Helping the recovery along is an absence of new industrial facilities being built, as to date rent growth has not been strong enough to support new construction. Only 41 million sq. ft. of industrial space is expected to be completed in 2012, well below the pre-recession historical norm which averaged approximately 150 million sq. ft. on an annual basis. However, rent growth is expected to gain momentum, rising from an expected 2.4% in 2012 to more than 3% in 2013 and nearly 5% in 2014. Industrial rents, while keeping pace with inflation this year, will grow above the rate of inflation in 2013 for the first time since 2006.
“U.S. industrial markets continue to struggle against a residual overhang of space stemming from the last recession and weak economic fundamentals, which has limited demand. Nevertheless steady absorption over the past two years has finally reduced available space to the point where property owners in select markets can now command higher rents,” said Arthur Jones, Senior Managing Economist, CBRE Econometric Advisors. “While economic and fiscal policy uncertainty continues to constrain demand, we expect the recovery of industrial real estate to accelerate over the next two years.”
The CBRE analysis notes that most markets, 41 of 58 tracked, are on a recovery path with positive demand foreseen for the next 12 months. Texas markets continue to perform well, with both Houston and Fort Worth now below their 10-year historical average availability rate level. Some select markets have already seen rents fully recover; in Denver, for example, effective industrial rents have increased by 16% over the past year and are now more than 3% above their pre-recession peak.
To speak with Mr. Jones or another CBRE expert, please contact Robert McGrath (212.984.8267 or Robert.McGrath@cbre.com).
1 Availability is space that is actively being marketed and available for tenant build-out within 12 months.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2011 revenue). The Company has approximately 34,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com.