Cassidy Turley Reports Surging Demand, Tightening Vacancy in the Industrial Sector
Outlook is clouded by rising oil prices
WASHINGTON, April 14, 2011 /PRNewswire/ -- Cassidy Turley, a leading commercial real estate services provider in the U.S., reports the industrial sector took a giant step forward in the ongoing recovery.
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"The speed of the recovery in the industrial sector is accelerating and despite worrisome developments overseas, overall momentum should remain positive," said Kevin Thorpe, Chief Economist at Cassidy Turley. "After a few quarters of tepid improvement, pent up demand for warehouse space is now being unleashed."
According to Cassidy Turley, in the first quarter of 2011, net demand registered at +24.7 million square feet – an absorption level that rivals some of the quarterly gains made during the last real estate boom, 2004 to 2007. Net absorption has turned positive throughout most of the country. Of the 67 markets tracked, 47 markets registered net gains in demand. All four U.S. regions reported net increases for the quarter, the South leading the way with +13.3 million square feet absorbed. Markets registering the strongest gains included Atlanta, Chicago, Phoenix and Dallas – all recording over 2 million square feet of net demand.
The report finds that U.S. industrial vacancy, which began stabilizing in 2010, is now trending downwards in 2011. Overall, vacancy rates decreased by 20 basis points (BPS) from the previous quarter to 9.5 percent. Vacancy is still 100 BPS above its historical average of 8.7 percent dating back to 1990. According to the report, rents are finally beginning to stabilize, but at very low levels. Average asking rents registered at $5.08 NNN for the quarter, down just two cents from the previous quarter. Rents are down 12 percent from their peak level of $5.70 observed in the third quarter of 2008.
"All the factors that drive the industrial sector are generally heading in the right direction," said Mr. Thorpe. "Economic data on the manufacturing sector remains bright and persistent consumer spending as well as improving global demand continue to power the recovery. Geopolitical risks cloud the outlook – and rising oil prices remain a major threat - but the positive momentum still outweighs the downside risks, and odds still easily favor that the industrial recovery will continue."
According to Cassidy Turley's research, industrial property sales continue to gain momentum as values rise. New offerings reached $3.5 billion in February—the highest since March of 2010. U.S. cap rates have been steadily trending down for months, and currently sit at 8.1 percent.
Cassidy Turley's 1st Quarter National Industrial Trends Report can be accessed here.
About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider with 3,000 professionals in 60 offices nationwide. The company represents a wide range of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions. The firm completed transactions valued at $17 billion in 2010, manages 430 million square feet on behalf of private, institutional and corporate clients and supports over 25,000 domestic corporate services locations. Cassidy Turley serves owners, investors and occupiers with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services, and research and consulting. In 2010, the firm enhanced its global service delivery outside of North America through its partnership with GVA. Please visit www.cassidyturley.com for more information about Cassidy Turley.
SOURCE Cassidy Turley
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