Los Angeles, December 3, 2013– The three-plus year-old recovery of U.S. industrial real estate markets will extend into 2014, as growing international trade and increased industrial production throughout the U.S. will help sustain increased demand for warehouse and distribution space, according to CBRE Group, Inc.
CBRE expects the national industrial availability1 rate to fall to 11.2% in 2014 and to 11.1% by the end of 2015. The national industrial availability rate peaked at 14.6% in Q2 2010, and has fallen to 11.7% at the end of Q3 2013.
The recovery continues to be helped by a paucity of new industrial construction. Only 59 million sq. ft. of industrial space is expected to be completed nationally in 2013, well below the pre-recession average of approximately 150 million sq. ft. annually.
CBRE’s analysis forecasts that rent growth will continue to gain momentum, rising 4.4% in 2014 and 4.6% in 2015. Industrial rent growth is expected to exceed the rate of inflation in 2013, for the first time since 2006.
“The important demand drivers for industrial space are positive, and we expect the need for industrial space to remain healthy in 2014,” said Jared Sullivan, Senior Economist, CBRE Econometric Advisors. “International trade continues to expand, with exports 10% above their pre-recession peak (September 2013). Industrial production recently hit its pre-recession high, and we expect it will grow further as the U.S. continues to benefit from increased international competitiveness. Inventories remain positive, which will further boost the necessity for industrial space.”
“The story behind these statistics is that availability will continue to drop because absorption is picking up much faster than construction. Rents fell substantially during the recession and we are only beginning to see recovery and rent growth, while interest rates and other concerns have kept a relative lid on construction in many markets,” said Scott Marshall, CBRE’s Executive Managing Director of Industrial Services, Americas. “We may see spot shortages of space developing in some of the healthiest markets, including Orange County, Los Angeles Metro, Denver and Oakland. These trends are exemplified by the conversations we are having with many institutional owners, where they are singing the praises of ‘rent growth’ for first time since pre-recession.”
To speak with Messrs. Sullivan or Marshall or David Egan, Director of Research and Analysis, 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 and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 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 website at www.cbre.com.