Gap between demand for warehouses and newly constructed supply widened in past 2 quarters as e-commerce continues to provide momentum
Los Angeles – The availability rate for U.S. industrial real estate declined by 11 basis points (bps) in the third quarter, marking its 33nd consecutive quarterly decline, as demand for warehouses, distribution centers and other industrial property continues to outpace supply, according to a new report from CBRE.
Availability of U.S. industrial real estate dipped to 7.1 percent in the third quarter, the lowest point since 2000. The streak of 33 consecutive quarters of declining availability is the longest since CBRE started tracking the data in 1988.
Demand for warehouses and distribution centers remains driven by the growth of e-commerce and the general strength of the U.S. economy. Overall, preliminary data show that net absorption across the 55 markets tracked by CBRE amounted to 63 million sq. ft. in the quarter, outpacing construction completions of nearly 50 million sq. ft.
The gap between demand for industrial space and newly delivered supply widened in the past two quarters. Over the past year, demand has exceeded supply by 34 million sq. ft.
“This slight widening of the supply-demand gap of late underscores the industrial sector’s late-cycle strength,” said Richard Barkham, CBRE Global Chief Economist. “Underlying economic conditions are solid. But there also is a strong pipeline of new construction underway, which likely will cause the gap to narrow again in the short- to medium-term.”
CBRE defines availability as the sum of vacant space plus space that is currently occupied but otherwise being marketed for use by new tenants. In the second quarter, 37 of the markets posted declines in industrial availability from the second quarter, 19 reported increases and eight remained unchanged.
Among the markets that registered the largest declines in industrial availability in the second quarter were New Haven, Conn. (down 320 bps) and Jacksonville (down 270 bps). Those posting the largest gains in availability include Hartford (up 180 bps) and San Antonio (up 160 bps).