BOSTON,, MA -- Following a strong third quarter, the industrial real estate market was marked by steady demand during Q4, although rents and construction did not increase as much as anticipated, according to a report by Colliers International, the global real estate services firm.
Fourth quarter absorption was back above the 50.0 msf (million square feet) threshold with occupied space increasing by 50.9 msf, compared with 48.4 msf during Q3 and 57.5 msf during the year-ago quarter. Full-year absorption totaled 188.6 msf in 2006, as compared with 2005, when occupied space increased by 222.8 msf.
"The warehouse market is poised for steady performance in 2007, although all eyes will be on the supply side, which is beginning to show signs of over-supply," remarked Ross Moore, senior vice president and director of market and economic research at Colliers International. "Vacancy levels are unlikely to retreat, and have largely hit bottom for this cycle -- but we don't expect a major increase anytime soon. That said, for both investors and tenants, market fundamentals look promising into the foreseeable future."
However, demand drivers have begun to reflect an economy in flux. The much-watched ISM index is back below the critical "50" level -- at 49.3 for January. Nonetheless, advance Q4 GDP shows the U.S. economy expanding at a healthy 3.5 percent annual rate. Giving comfort to many, the global economy is still showing robust growth, and this will continue to bolster the export sector.
Fourth quarter industrial vacancies measured 8.19 percent, versus 8.21 percent during Q3 and 8.55 percent during the year-ago quarter. Warehouse rents increased by just 0.4 percent in Q4, after rising 3.6 percent during the third quarter. Rents were up 7.0 percent year-over-year, compared with 2005, when they increased by 4.6 percent.
Just a handful of markets are forecasting demand to drop during Q1'07, with the vast majority anticipating leasing markets to remain robust.
New construction increased by a smaller amount than anticipated during the fourth quarter, totaling 49.6 msf, versus 49.5 msf in Q3. Year-ago completions totaled 40.0 msf. Construction for the full year totaled 180.9 msf - this compares with 2005 when inventory increased by 144.5 msf.
Industrial developments under construction increased by 14.4 msf during the fourth quarter, reaching 135.4 msf. This compares to 121.0 msf during Q3 and 108.6 msf at the close of the year-ago quarter - suggesting deliveries will remain at elevated levels.
Industrial Rents - Q4'06 / Q4'05
Warehouse/Distrib. Warehouse/Distrib.
Space (US$PSF) Space (US$PSF) Annual
MARKET DEC. 31, 2006 DEC. 31, 2005 Change,%
West Palm Beach, FL 8.44 6.99 20.7
Oakland, CA 5.16 4.32 19.4
Boise, ID 6.03 5.05 19.4
Tampa, FL 5.53 4.73 16.9
Orange County, CA 8.40 7.20 16.7
Reno, NV 4.08 3.50 16.6
Houston, TX 4.45 3.84 15.9
Seattle, WA 6.36 5.60 13.6
Denver, CO 4.25 3.75 13.3
Raleigh, NC 4.25 3.75 13.3
Pleasanton/Walnut Creek, CA 4.93 4.36 13.1
Los Angeles, CA 7.67 6.85 12.0
Philadelphia, PA 4.75 4.25 11.8
Orlando, FL 5.25 4.74 10.8
Honolulu, HI 13.10 11.84 10.6
Baltimore, MD 6.46 5.89 9.7
New Jersey - Central 5.05 4.63 9.1
Inland Empire, CA 5.58 5.16 8.1
Washington, DC 8.38 7.78 7.7
Ft. Lauderdale, FL 7.46 6.93 7.6
Kansas City, MO 4.25 3.95 7.6
Nashville, TN 3.71 3.45 7.5
New Jersey - Northern 6.63 6.21 6.8
St. Louis, MO 4.00 3.75 6.7
Minneapolis, MN 4.55 4.27 6.6
Boston, MA 5.84 5.50 6.2
Cleveland, OH 3.74 3.54 5.6
San Diego, CA 9.00 8.52 5.6
Louisville, KY 3.95 3.75 5.3
Sacramento, CA 6.04 5.76 4.9
San Jose/Silicon Valley, CA 5.11 4.89 4.5
Dallas-Ft. Worth, TX 3.50 3.35 4.5
Phoenix, AZ 6.54 6.28 4.1
Memphis, TN 2.70 2.60 3.8
Miami, FL 7.63 7.36 3.7
Portland, OR 4.71 4.56 3.3
Jacksonville, FL 3.75 3.68 1.9
Charleston, SC 3.73 3.68 1.4
Atlanta, GA 3.80 3.75 1.3
San Francisco Peninsula - CA 9.36 9.24 1.3
Columbia, SC 3.90 3.87 0.8
Bakersfield, CA 3.60 3.60 0.0
Charlotte, NC 4.11 4.11 0.0
Cincinnati, OH 3.20 3.20 0.0
Fresno, California 3.20 3.20 0.0
Greenville, SC 3.50 3.50 0.0
Hartford, CT 4.50 4.50 0.0
Las Vegas, NV 5.52 5.52 0.0
Little Rock, AR 3.25 3.25 0.0
Milwaukee, WI 4.20 4.20 0.0
Chicago, IL 4.56 4.58 -0.4
Indianapolis, IN 5.75 5.88 -2.2
Detroit, MI 4.75 5.00 -5.0
About Colliers
Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 9,327 employees span the world in 241 offices in 54 countries. On a worldwide basis, Colliers manages 595,725,580 square feet, and has revenue of $US 1,442,478,223. For more information, visit www.colliers.com.
Source: Colliers International
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| Notes:
CONTACT: Kristin Sadlon, of Porter Novelli for Colliers,
+1-212-601-8192, Kristin.sadlon@Porternovelli.com
Web site: http://www.colliers.com/
About This Release
If you have any questions regarding information in this press release, please contact the organization listed in the press release. Issuers of press releases and not TCI are solely responsible for the accuracy of the content.
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