Decline Is 28th of past 29 quarters, but supply-demand gap narrowing
Los Angeles -The average availability rate for warehouses and distribution centers in the U.S. declined by 10 basis points (bps) in the third quarter, fueled by strong demand that again outpaced increasing new supply, according to a new report from CBRE.
U.S. industrial availability registered 7.7 percent in the third quarter, down from 7.8 percent in the second quarter and from 7.9 percent a year earlier. The decline was the market’s 28th of the past 29 quarters. The only increase came in this year’s first quarter.
CBRE’s preliminary data show third-quarter net absorption of industrial space – a proxy for demand – at 61 million sq. ft. That’s slightly less than the two-year average. Meanwhile, construction completions of nearly 51 million sq. ft. during the quarter slightly exceeded the two-year average for new supply.
Jeffrey Havsy, CBRE Americas Chief Economist, said various economic and industry indicators bode well for sustained momentum in the U.S. industrial market. Those include GDP growth and strong gains in warehouse employment.
“With growth expected to remain at a similar pace for the fourth quarter and into early next year, we expect demand to remain strong,” Mr. Havsy said. “The supply pipeline is increasing, but vacancy isn’t expected to rise dramatically, and the market remains fundamentally balanced.”
CBRE defines availability as the full amount of space available for lease, including vacant space and currently occupied space being marketed for occupation by other users. The current availability rate is the lowest since 2001.
In the third quarter, 33 of the U.S. markets that CBRE tracks registered declines in their industrial availability rates. Twenty-four registered increases. Eight were unchanged.