-
K.C. CONWAY Chief Economist | USA
KEY TAKEAWAYS
North America is still working on the railroad. Railroad hiring
in June grew for the fifth consecutive month, the highest level of
total railroad employment (164,659 jobs) since July 2008.
Manufacturing and warehousing contributed a combined 26,000 jobs to
the disappointing 162,000 net jobs created in August.
What could derail industrials recovery? For the ninth
consecutive quarter, the aggregate North American vacancy rate
declined for the 77 markets tracked by Colliers. Q2 vacancy is down
2 basis points to 8.18% (8.63% among the primary 65 U.S. markets
and 4.37% among the 12 primary Canadian markets) despite the
addition of 23.7 MSF of new supply.
Both the PMI and Rail Time Indicators show that 2H 2013 will
remain strong for manufacturing and industrial activity. Augusts
PMI of 55.7 was the highest since June 2011, and YTD 2013.
Absorption remains strong despite sub-200K monthly job growth.
On the heels of nearly 71 MSF of net absorption in Q4 2012, the
market absorbed another 92 MSF in 1H 2013 (50.5 MSF in Q1 and 41.5
MSF in Q2.)
Global GDP forecasts are below trend. The IMFs 2H 2013 GDP
forecasts for both Emerging Markets and Advanced Economies appear
to be flattening. Lack of robust global GDP growth may impact U.S.
industrial real estate as early as 1H 2014.
Leadership in warehouse leasing continues to come from the
inland distribution markets. Six of the top 10 MSAs for Q2
absorption were inland distribution or emerging inland port markets
(Atlanta, Dallas, Denver, etc.). Los Angeles and Jacksonville, FL,
were the only port markets in the top 10 for Q2 2013.
New supply continues to increase, but is neither excessive nor
speculative. According to Dodge Pipeline, new industrial
construction in Q2 increased 28% to 52 MSF. However, this level of
new supply is approximately the quarterly average net absorption
since Q1 2012 (45 MSF), and more than half is pre-leased or
build-to-suit distribution centers for major retailers and
manufacturers (Amazon, Nike, Ross, etc.)
Still working on the Railroad all the live-long day
HIGHLIGHTSNORTH AMERICA
WWW.COLLIERS.COM
Q2 2013 | INDUSTRIAL
N.A. INDUSTRIAL MARKETSUMMARY STATISTICS, Q2 2013
US Q2
2013
US Q3
2013*
Canada Q2
2013
Canada Q3
2013*
VACANCY
NET ABSORPTION CONSTRUCTION
RENTAL RATE**
*Projected, relative to prior period**Warehouse rents
MARKET INDICATORSRelative to prior period
US CAN NA
VACANCY RATE (%)* 8.63 4.37 8.18
Change from Q1 2013 (%) -0.20 0.24 -0.15
ABSORPTION (MSF) 42.0 -0.5 41.5
NEW CONSTRUCTION (MSF) 17.9 5.8 23.7
UNDER CONSTRUCTION (MSF) 74.3 11.7 86.0
*As a result of an inventory re-classification of certain
property sub-types, 1Q13 and 2Q13 vacancy rates were adjusted in
Q2.
ASKING RENTS PER SF (USD/CAD) US CAN NA
Average Warehouse/Distribution Center
4.81 7.73 5.27
Change from Q1 2013 (%) 1.12 1.47 1.20
Ive been working on the railroad
All the live-long day.
Ive been working on the railroad
Just to pass the time away.
Cant you hear the whistle blowing,
Rise up so early in the morn;
Cant you hear the captain shouting,
Dinah, blow your horn!
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
Still working on the railroad all the live-long day
Few areas of the U.S. economy have turned in as consistent a
recovery since 2009 as the rail-road industry. Whereas the overall
labor market has sputtered, unable to produce even 200,000 net new
jobs per month (198,000 per month in 1H 2013and only 148,000 per
month from June to August), railroad employment has been
consistently adding jobs. Railroad employment in June saw its fifth
consecutive month of growth, and reached its highest
total165,000since July 2008.
P. 3 | COLLIERS INTERNATIONAL
135,000
140,000
145,000
150,000
155,000
160,000
165,000
170,000
2006 2007 2008 2009 2010 2011 2012 2013
May 2013 to June 2013: +220
CLASS I RAILROAD EMPLOYMENT | JAN 2006JUNE 2013
Increases of approx. 1,000 employees after Jan. 2013 reflect
acquisition of two large railroads by a Class I railroad. Data not
seasonally adjusted. | SOURCE: Surface Transportation Board
949698
100102104106108110112114
2010 2011 2012 2013
EMPLOYMENT | JAN 2010JUNE 2013 (JAN 2010 = 100)
SOURCE: Surface Transportation Board, Bureau of Labor
Statistics
Class I Railroad Employment vs. Employment for All U.S.
Industries
Sq. Ft. By Region
Absorption Per Market (SF)q1 '13 - q2 '13
4,600,000
2,300,000
460,000
-460,000
-2,300,000
-4,600,000
4 billion
2 billion
400 mil
Occupied Sq. Ft.
Vacant Sq. Ft.
NORTH AMERICAN INDUSTRIAL VACANCY, INVENTORY AND ABSORPTION | Q2
2013
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 4
INTERMODAL TRAFFIC | CONTAINERS & TRAILERS
Month Current Year Previous Year Percent Change
June 2012 248,999 236,714 5.2%
July 2012 236,515 223,910 5.6%
August 2012 246,194 235,969 4.3%
September 2012 246,118 237,397 3.7%
October 2012 246,695 242,953 1.5%
November 2012 233,649 230,769 1.2%
December 2012 222,001 218,328 1.7%
January 2013 233,726 222,065 5.3%
February 2013 245,770 222,462 10.5%
March 2013 233,302 232,087 0.5%
April 2013 240,505 236,742 1.6%
May 2013 242,823 235,665 3.0%
June 2013 252,347 248,999 1.3%
July 2013 243,725 237,859 2.5%
SOURCE: AAR Rail Time Indicators
150,000
200,000
250,000
300,000
2009 2010 2011 2012 2013
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
AVERAGE WEEKLY U.S. RAIL INTERMODAL TRAFFIC
Data are weekly average originations for each month, excluding
U.S. operations of CN and CP, and reflect revisions to original
reporting. | SOURCE: AAR Weekly Rail Traffic
-10
-8
-6
-4
-2
0
2
4
6
2.71.5 2
-2.7-2
-8.3
-5.4-5.4
-0.4-0.4
1.3
3.93.9
1.6
3.93.9
-1.3-1.3
2.8 2.82.8 2.83.23.2
1.41.4
4.94.93.73.7
1.2
2.82.8
0.11.1
2.52.5
1H 101H 11
1H 121H 13
UNITED STATES GDP GROWTH RATE (% CHANGE)
SOURCE: www.tradingeconomics.com | Bureau of Economic
Analysis
And if these employment statistics are not enough to switch your
thinking to the other side of the track (you know, the growth
track), consider the increases in traffic:
Total intermodal traffic has shown year-over year growth every
month since December 2009 (44 consecutive months), and is up 4.3
percent for 1H 2013. This is a direct result of growth in
manufacturing and exports.
These railroad employment and intermodal traffic metrics mean
more demand for U.S. industrial warehouse space, which has
translated into a ninth consecutive quarter of improving occupancy,
absorption and rental rates for North American industrial real
estateespecially in the U.S., where vacancy compressed another 20
basis points to 8.63%, despite the addition of another 17.9 MSF of
space. Dont be so quick to believe those Federal Reserve Bank
district manufacturing surveys created from anec-dotal information
collected from statistically invalid samplings of manufac-turers.
Believe what is occurring on the railroads all the live-long day.
The Association of American Railroads (AAR) counts it all every
month and publishes the findings in Rail Time Indicators, the best
forward-looking monthly industrial report you can find. Why use
survey data when you can access robust primary data?
Beyond AARs Rail Time Indicators, other economic measuressuch as
GDP and the Institute for Supply Managements Purchasing Managers
Index (PMI)indicate that growth in 2H 2013 growth will be volatile
and probab ly weaker, due to the return of uncertainty.
Lets start with GDP, which is on another roller coaster ride.
The Advance Estimate of Q1 GDP was 2.4%, which was finally revised
to a disappoint-ing 1.1%. The Advance Estimate for Q2 was just
1.7%, but then underwent an initial revised estimate at the end of
August upward to a surprising 2.5%. Q2 GDP wont be finalized until
September 26. However, given the troubling August jobs report, and
the horrific track record of Bureau of Economic Analysis (BEA) in
guesstimating GDP, the only certainty is that Q2 GDP will be
anything but the BEAs 2.5% forecast. The relevant take-away from
GDP is the trend, that suggests that U.S. GDP is slipping back to
an anemic level on par with 2H 2009, or even 2H 2012when the
looming uncertainty of the elections, sequestration, budget cuts,
and the implemen-tation of tax increases and Obamacare sucked the
life out of business and consumer confidence. The latest report on
GDP also notes that the weak-ness in economic growth is most
pronounced in declining government ex-penditures at the federal,
state and municipal levels. This will only intensify with Congress
at an impasse with the White House over deficit spending and
further tax increases.
-
P. 5 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
In addition, the International Monetary Fund (IMF) has lowered
its forecast for 2013 Global GDP Growth to approximately 3%. The
IMFs updated July 2013 global GDP forecast, stratified for Emerging
Markets (like those in LATAM) and Advanced Economies (such as the
United States, Europe and Japan), shows a flattening trend for
both.
SOURCE: Institute of Supply Management
MONTH PMI MONTH PMIAug 2013 55.7 Feb 2013 54.2Jul 2013 55.4 Jan
2013 53.1Jun 2013 50.9 Dec 2013 50.2May 2013 49.0 Nov 2012 49.9Apr
2013 50.7 Oct 2012 51.7Mar 2013 51.3 Sep 2012 51.6
Average for 12 Months: 52.0 (High: 55.7 | Low: 49.0)
8.3% 1.4%
40.9%66.7%
55.6% 60.0%66.7%
54.2% 56.3%
59.1%33.3%
44.4% 40.0%25.0%
45.8% 42.3%
8.3% 1.4%
40.9% 66.7%
55.6% 60.0% 66.7%
54.2% 56.3%
59.1% 33.3%
44.4% 40.0% 25.0%
45.8% 42.3%
0%10%20%30%40%50%60%70%80%90%
100%
West South Northeast Midwest Canada U.S. N.A.
Contract Holding Steady Expand
OF THE LEASES SIGNED THIS QUARTER*, DID MOST TENANTS...?
*Excluding renewals % of Reporting Markets
80.0% 77.8%66.7%
81.8%
25.0%
76.3% 67.6%
10.0% 22.2% 33.3% 9.1%
58.3%
18.6% 25.4%
10.0% 9.1% 16.7%5.1% 7.0%
80.0% 77.8% 66.7%
81.8%
25.0%
76.3% 67.6%
10.0% 22.2% 33.3% 9.1%
58.3%
18.6% 25.4%
10.0% 9.1% 16.7% 5.1% 7.0%
0%10%20%30%40%50%60%70%80%90%
100%
Midwest Northeast South West Canada U.S. N.A.
Down Same Up
3-MONTH FORECAST FOR VACANCY LEVELS (relative to current
quarter)
% of Reporting Markets
8.3%
1.7%
2.8%
10.2%
8.5%
33.3%
25.4%
26.8%
41.7%
61.0%
57.7%
16.7%
1.7%
4.2%
8.3%
1.7%
2.8%
10.2%
8.5%
33.3%
25.4%
26.8%
41.7%
61.0%
57.7%
16.7%
1.7%
4.2%
0% 20% 40% 60% 80% 100%
Canada
U.S.
N.A.
Declining Bottoming No Clear Direction Increasing Peaking
CHARACTERIZE CURRENT INDUSTRIAL RENTS IN YOUR MARKET
% of Reporting Markets
10.0% 1.7% 1.4%
50.0%
33.3%
61.1%
18.2%
83.3%
39.0% 46.5%
40.0%66.7%
38.9%
81.8%
16.7%
59.3% 52.1%
10.0% 1.7% 1.4%
50.0%
33.3%
61.1%
18.2%
83.3%
39.0% 46.5%
40.0% 66.7%
38.9%
81.8%
16.7%
59.3% 52.1%
0%10%20%30%40%50%60%70%80%90%
100%
Midwest Northeast South West Canada U.S. N.A.
Down Same Up
3-MONTH FORECAST FOR RENTS (relative to current quarter)
% of Reporting Markets
-1
0
1
2
3
4
5
6
7
2011 2012 2013
Advanced economies World Emerging market and developing
economies
GLOBAL GDP GROWTH | % QUARTER OVER QUARTER, ANNUALIZED
SOURCE: IMF staff estimates
At some point the absence of more robust global GDP growth will
begin to impact U.S. industrial real estate. This is most likely to
occur in 1H 2014 as all but U.S. energy and agricultural exports
see lower demand from Emerging Markets and Advanced Economies
alike. All those companies that have on-shored their manufacturing
(or are in the process of doing so), may be hard-hit in 2014 by
anemic global GDP and higher interest rates caused by tapering off
of quantitative easing by the Federal reserve.
The closely watched PMI is another key economic metric for
industrial real estate. Like Rail Time Indicators, the PMI is
encouraging. It, too, is indicating reason for optimism in 2H 2013:
After a disappointing reading below 50 in May, the PMI has
rebounded over the summer, with three consecutive readings above
50. Augusts 55.7 measure is the highest reading in 2013, and the
highest since June 2011.
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 6
MANUFACTURING AT A GLANCE | APRIL 2013
INDEX SERIES INDEXAPRILSERIES INDEX
MARCHCHANGE
(%) DIRECTIONRATE
OF CHANGETREND*
(MONTHS)
PMI 55.7 55.4 +0.3 Growing Faster 3
New Orders 63.2 58.3 +4.9 Growing Faster 4
Production 62.4 65.0 -2.6 Growing Slower 3
Employment 53.3 54.4 -1.1 Growing Slower 2
Supplier Deliveries 52.3 52.1 +0.2 Slowing Faster 2
Inventories 47.5 47.0 +0.5 Contracting Slower 2
Customers' Inventories 42.5 47.5 -5.0 Too Low Faster 21
Prices 54.0 49.0 +5.0 Increasing From Decreasing 1
Backlog of Orders 46.5 45.0 +1.5 Contracting Slower 4
Exports 55.5 53.5 +2.0 Growing Faster 9
Imports 58.0 57.5 +0.5 Growing Faster 7
OVERALL ECONOMY Growing Faster 51
Manufacturing Sector Growing Faster 3
*Number of months moving in current direction | SOURCE:
Institute of Supply Management
Aside from the macro PMI measure, the detail behind it is
revealing. The latest reading for August showed growth in several
key areas, such as new orders, production and employment. It also
indicated that inventories were contracting (meaning that
wholesalers and retailers will need to re-stock prior to the
holiday shopping season), and exports were still growing. This
later item adds weight to the view that Europe may have bottomed,
and LATAM is still experiencing robust growth.
DIGGING INTO THE NORTH AMERICAN INDUSTRIAL VITAL STATSNorth
American industrial warehouse markets have pitched what baseball
fans would call a perfect game: nine successive quarters of
declining vacancy rates, with net absorption outpacing new supply
by more than 2:1.
Since Canadian markets account for only 10 percent of North
American warehouse spaceand these 12 markets have maintained a
stable vacancy rate of approximately 5 percent with only moderate
new supplythe improvement in these North American industrial
metrics is largely due to strong performance by the primary 65 U.S.
warehouse markets. One wonders what can derail industrial real
estate performance. In our
previous Industrial Outlook report we referenced several
articles that weighed the risks posed by a potential stock price
bubble, and the track ahead is far from clear. Waiting around the
bend are several signs of uncertainty: Steep Grade (the pending
departure of Federal Reserve Chairman Ben Bernanke and the possible
impact on Fed policy), Switch Closed (the renewed congressional
showdown over the deficit ceiling), and Runaway Train (instability
in the Middle East). To avoid disaster, industrial real estatealong
with all property typesmay have to pull into a siding during 2H
2013.
-
P. 7 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
NORTH AMERICAN INDUSTRIAL OVERVIEW | Q2 2013
MEASURE NORTH AMERICA CANADA UNITED STATES WEST/ MIDWEST SOUTH
NORTHEAST
# of Markets 77 12 65 35 21 9
Inventory (MSF) 16,087.0 1,722.8 14,364.2 8,027.0 4,131.2
2,206.0
% of N.A. Inventory 100% 10.7% 89.3% 49.9% 25.7% 13.7%
New Supply (Q2 2013, MSF) 23.7 5.8 17.9 9.4 7.0 1.5
% of N.A. New Supply 100% 24.5% 75.5% 39.7% 29.4% 6.4%
Vacancy (%) 8.18% 4.37% 8.63% 7.88% 9.50% 9.74%
Absorption (MSF) 41.5 (0.5) 42.0 24.1 16.2 1.7
% of N.A. Absorption 100% -1.2% 101.2% 58.0% 39.0% 4.2%
Leadership Markets Absorption: Calgary, Waterloo and
Saskatoon
(All with more than 200K SF of net
absorption in Q2. Calgary led with 671K
SF of net leasng activity.)
Absorption: Inland markets (with the
exception of LA and Long Island) Atlanta (4.5
MSF); Dallas/Ft. Worth (3.8 MSF); Inland Empire
(3.6 MSF); Denver and San Jose (each with 1.8
MSF); Columbus, OH, Charlotte, Greenville, SC,
and Jacksonville (all > 1.4 MSF)
Absorption: Inland Empire (3.6 MSF); San
Jose & Denver (each with 1.8 MSF), Los
Angeles (1.65 MSF) and Columbus, OH, (1.4
MSFair cargo matters).
Absorption: Atlanta (a repeat with 4.5
MSF), DFW (3.8 MSF), Charlotte, NC, (1.75
MSF, housing recovery), and Greenville, SC, and Jacksonville
(1.4 MSF,
new inland port and port strength).
Absorption: The story here is Philadelphia
(1.0 MSF, energy and the Inland Empire of the NE)
and Long Island (Hurricane Sandy
rebuild).
Laggard Markets Absorption: Toronto, Winnipeg and
Vancouver (net negative in Q2).
Vacancy: Halifax, Waterloo and Calgary
(above 5.5%).
US CAN NA
Vacancy Rate 8.63% 4.37% 8.18%
Change from Q1 2013 -0.20% 0.24% -0.15%
Behind the Statistics & Beyond the Basics:
Scope of Colliers Industrial Outlook Report: Colliers monitors
industrial property conditions in 77 North American markets from
Miami to Montreal, totaling 16.1 billion square feet of inventory.
Approximately 89 percent (14.4 billion square feet) of this
inventory is located in the United States.
Despite a comparatively small adjustment to inventory
classification (see note at top right), the U.S. West and Midwest
continue to constitute approximately 60 percent of North American
industrial warehouse space
NOTE: Colliers Q2 U.S. inventory numbers have declined slightly
from previous reports (approximately 1.5 percent, or 191 million
square feet) due to a culling of specialty warehouse property types
(e.g., self storage). This change aligns MSA inventory levels with
industry sources, such as CoStar, that increasingly exclude
specialty warehouse property from bulk and distribution warehouse
measures. This adjustment was not necessary in Colliers Canadian
markets.
VACANCYVacancy continues to decline in North American warehouse
marketsmuch more in U.S. markets, due to a greater oversupply than
in Canada and the incredible onshoring of manufacturing. From a
regional perspective, Canada has the lowest average vacancy rate in
North America (4.37 per-cent, up 24 basis points from Q1 2013, due
primarily to new construction activity), and the Northeast U.S.
continues to have the highest vacancy rate at 9.74 percent (up 18
basis points from Q1 2013). The West and Midwest
are the only two regions in the U.S. with vacancy rates below
the 8.63 percent national average.
(8.0 billion square feet), and approximately 60% of annual U.S.
net leasing activity. The South is the next-largest region, with
4.1 billion square feet, or 26% of North American industrial
warehouse space. The expansion of the Panama Canaland the addition
of at least five more post-Panamax ports to the East and Gulf
coasts, will only enhance the market share of key inland and port
distribution markets in the southeastern and southwestern U.S. by
2015. With respect to the numbers for Q2 2013, the following table
tells the story:
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 8
TOP 23 NORTH AMERICAN INDUSTRIAL MARKETS WITH VACANCY BELOW
NORTH AMERICAN AVERAGE
VACANCY RANKING MSA
Q1 2013 VACANCY RATE (%)
MARKET PROFILE
1
CANA
DA
Vancouver 4.1 3rd largest Canadian industrial market
2 Toronto 4.1 Largest Canadian industrial market
3 Montreal 4.5 2nd largest Canadian industrial market
4 Calgary 5.45 4th largest Canadian industrial market
5
UNI
TED
STAT
ES
Honolulu 3.2 Top-20 North American port
6 Los Angeles 3.5 Busiest North American TEU container port
7 Bakersfield, CA 4.4
8 Orange County, CA 4.7
9 Houston 5.1 Busiest Gulf Coast port
10 Omaha, NE 5.35
11 Seattle 5.5 PPMX port/Top-20 North American port
12 Long Island 5.5 Port of NY influence
13 Kansas City 6.1 Top-10 North American intermodal rail
14 Miami 6.6 Top-20 North American port to Latin America
15 Boise, ID 6.7 New to top-20 rankings for low vacancy
16 Indianapolis 6.7 Key intermodal link to Port Rupert
17 Grand Rapids 6.9 Proximity to Great Lakes ports and rail
18 Milwaukee 6.9 Key Great Lakes region port
19 Columbia, SC 7.0 Benefiting from port of Charleston
20 Oakland, CA 7.0 PPMX port/Top-20 North American port
21 Portland 7.2 Labor issues have impacted vacancy
22 Columbus, OH 7.3 Top-5 air cargo market; link to port of
Virginia
23 West Palm Beach, FL 7.35 Benefitting from South Florida trade
to LATAM
24 Denver 7.35 Top 10-intermodal rail & air cargo
24 San Francisco 7.4 Vital West Coast port
25 Cincinnati 7.8Key Midwest manufacturing & industrial
market
26 Minneapolis 7.85Key Midwest manufacturing & industrial
market
27 Pittsburgh 7.9Key Midwest manufacturing & industrial
market
28 St Louis, MO 8.18 The River City is revitalized
Drilling down to the MSA level, vacancy continues to improve the
most in primary port cities, and inland distribution markets with
large intermodal facilities. In Canada, among the four industrial
markets with at least 100 MSF of inventory, vacancy rates are
lowest in Vancouver (4.09 percent, up 59 basis point from Q1),
Toronto (4.11 percent; this quarters 22 basis points increase is
the third in a row), Montreal (up 73 basis points, 4.49 percent,
and the only large Canadian warehouse market to decline, down by 1
basis point), and Calgary (up 73 basis points to 5.45 percent, the
largest increase over Q1 for large Canadian markets).
In the U.S., seventeen markets have a vacancy rate below 7
percent and approximately 100 basis points below the North American
average of 8.18 percent. It is also important to note that 19 of
the 32 U.S. markets with vacancy rates below the 8.68% national
average are top-20 North American port or top-ten inland
distribution or air cargo markets with intermodal rail connecting
to one or more of the seven North American Class I railroads.
ABSORPTIONOver the preceding three quarters (Q4 2012Q2 2013) an
average of 54 MSF of industrial space was absorbed in North
America. With Canada averaging a modest 1.5 MSF per quarter, the
majority of this absorption has come from U.S. markets. In Q2,
Canada experienced net negative absorption of 500,000 square feet,
versus the U.S. markets which leased 42 MSF (down slightly from 47
MSF in Q1). What constitutes the weaker absorption in Q2 for both
the U.S. and Canada?
In Canada, the negative absorption is attributable to the
addition of new supply relative to the size of Canadian markets.
The 12 primary Canadian industrial markets (1.7 billion square feet
in size) added 5.8 MSF of new supply in Q2. That new supply
translates to 0.34% of Canadas warehouse inventory. In contrast,
the addition to new supply in the U.S. during Q2 translated to just
0.001% of existing inventory. In other words, Canada is adding new
supply at a pace that is excessive for its size. In contrast, while
the U.S. is also adding new supply, demand far exceeds the pace of
new deliveries. The U.S. markets delivered 17.9 MSF of new
warehouse space in Q2, but experienced 42.0 MSF of net leasing
activity. This ratio of more than 2:1 absorption to new supply has
been the norm for the U.S. ever since 2011. With 52 MSF of total
new supply underway in the U.S. for delivery over the next 24
quarters and an average quarterly absorption rate of 45 million
square feet, the U.S. should continue to see further decline in
vacancy in 2H 2013. Overbuilding risk is not a concern in U.S.
industrial markets, but it is in Canadian markets.
From a regional perspective, net absorption is strongest in the
West (16.9 MSF) and South (16.1 MSF), followed by the Midwest (7.1
MSF) and then the Northeast with just 1.7 MSF. The market
leadership in warehouse leasing during Q2 came from Los Angeles,
San Jose and Denver in the West; Atlanta, Dallas, Charlotte and
Greenville/Spartanburg SC (fueled by the new Port of Charleston
Inland port) in the South; Columbus, OH (air cargo), St. Louis and
Kansas City (new intermodal facility coming on line) in the
Midwest; and Philadelphia (energy and Inland Empire of the
Northeast), Long Island and Baltimore (newest post-Panamax port
along East Coast) in the Northeast.
-
P. 9 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
Rounding out the top ten this quarter are Charlotte (housing
recovery); the Port of Los Angeles (1.65 MSF), Columbus, OH,
(strength as an air cargo hub); Greenville/Spartanburg, SC,
(influence of new Inland Port by Charleston); and Jacksonville, FL,
(watch for Colliers upcoming North American Port Analysis report
for the audible that the port of Jacksonville has called thats
making a positive impact on industrial real estate).
STATENEW
WAREHOUSE CONSTRUCTION (MSF)
LARGEST DISTRIBUTION CENTERS UNDER CONSTRUCTION
Texas 7.0
Amazon: three >1.0 MSF centers in Dallas and San Antonio
Restoration Hardware: 850,000 SF in Grand Prairie (Dallas,
TX)
LOreal: 500,000 SF in suburban Dallas
New Jersey 4.9 Amazon: 1.0 MSF in Trenton
Georgia 3.6Home Depot: 1.0 MSF in Atlanta
Tractor Supply: 700,000 SF in Macon (Atlanta area)
Illinois 3.1 Trader Joes: 800,000 SF in Chicago
Arizona 2.0 American Furniture: 632,000 SF outside PhoenixOhio
2.8 Tween: 750,000 SF
Florida 2.7 Publix and OReilly Auto Parts: Orlando and
Lakeland
Pennsylvania 0.7 PetSmart and Dollar General
MSA Q2 2013 (MSF) MSA CY 2012 (MSF)
1 Atlanta(INTERMODAL) 4.5 Chicago13.438
(INTERMODAL)
2 Dallas(INTERMODAL) 3.8 Dallas9.728
(INTERMODAL)
3 Los Angeles(INLAND EMPIRE) 3.6 Detroit9.169
(AUTO RECOVERY)
4 San Jose 1.85 Los Angeles Inland Empire8.470
(INTERMODAL)
5 Denver(INTERMODAL) 1.8Los Angeles
Coastal8.375(PORT)
6 Charlotte, NC (HOUSING) 1.75 Atlanta7.400
(INTERMODAL)
7LA Port
(#1 IN NORTH AMERICA TEU)
1.65 Houston 6.245(PORT)
8 Columbus, OH (AIR CARGO) 1.45 Phoenix5.137
(HOUSING RECOVERY)
9 Greenville, SC (INLAND PORT) 1.4 Columbus, OH4.916
(AIR CARGO)
10 Jacksonville, FL(PORT) 1.35 Seattle3.916(PORT)
TOP 10 U.S. INDUSTRIAL MARKETS | ABSORPTION | Q2 2013 VS CY
2012
As was the case in Q1 2013 and 2H 2012, Inland markets are
outpacing port markets in absorption. The top 5 markets with
respect to net warehouse absorption Q1 2013 versus Q2 are as
follows:
CONSTRUCTION ACTIVITYFinally, after nine innings of a perfect
game, new construction is picking up in response to both demand and
the improved industrial real estate metrics (occupancy, absorption,
and rents). Not only is there a dearth of product for sale, but an
estimated 40% of existing U.S. warehouse space is functionally
obsolete (less than 28-foot clear height, etc.). There is also an
added urgency to obtain modern distribution space on the part of
retailers and manufacturers remaking their supply chains with
modern distribution facilities aligned with key post-Panamax ports,
intermodal rail facilities, and air cargo/e-commerce fulfillment
paths. In Q1, new construction activity increased by 27 percent,
from 32 MSF at year-end 2012 to 40.6 MSF. In Q2, that increase in
new supply continued with another near 25% increase in activity
(24% or 52 MSF). The ten states with the most warehouse and
distribution center space under construction remain Texas, New
Jersey, Georgia, Illinois, Pennsylvania, Ohio, Arizona, Florida,
Utah, and California (Source: Dodge Pipeline, Q1 2013).
Overbuilding risk is a natural concern that arises from such an
increase in new construction activity. While its worth monitoring
over the next 35 quarters, investors and developers can take
comfort in two key metrics that put this construction activity in
proper perspective. First, the 52 MSF of construction reported by
Dodge Pipeline is only slightly more than the average quarterly net
absorption over the previous four quarters (45 MSF); that is,
leasing activity is outpacing new construction four to one. Second,
more than half of this new construction is pre-leased or
build-to-suit for owner occupancy by large retailers and
manufacturers. National retailers, such as Amazon, Nike, Ross Dress
for Less, Harbor Freight Tools, Dollar Tree, Family Dollar, FedEx,
Home Depot, LOreal, Publix, OReilly Auto Parts, Restoration
Hardware, Target, Tractor Supply and Whole Foods, are constructing
in excess of 25 MSF of modern distribution and logistics cen-ters
from coast to coast. Heres a sampling of these projects in the ten
states with the most new construction activity:
MSA Q1 2013 (MSF) MSA Q2 2013 (MSF)
1 Chicago 6.0 Atlanta4.5
(Inland distribution, #7 air cargo market)
2 Los Angeles4.4
(Inland Empire: 2.05 MSF)
Dallas3.8
(Inland distribution, re-entering top 5)
3 Atlanta 3.0 LA-Inland Empire3.6
(5.45 MSF LA port + LA Inl)
4 Detroit 2.3(Right-to-work impact) San Jose 1.85
5 Cincinnati 2.1 Denver1.8
(Inland distribution, also moving into top 5)
Looking forward to 2014, delayed delivery of new space under
construc-tion is the only significant obstacle to industrial
leasing activity in key port and intermodal markets such as Los
Angeles, Seattle, Houston, Memphis and Greenville, SC. These
markets cant complete new space fast enough to meet demand, and
market forces will likely result in disproportionately high 2H 2013
net leasing activity, as was the case in 2012.
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 10
Overbuilding risk remains low despite the uptick in new
warehouse and distribution center construction during 1H 2013,
given the scarcity of debt capital for speculative construction by
banks and the limited amount of speculative warehouse construction
underway. If net absorption were to slip in 2H 2013, and new
projects increased at similar 25% rates per quarter, overbuilding
would be a concern in 2014.
One danger that spans all commercial property types is rising
construction costs. Because Colliers has elevated this item in
prior Outlook reports, it should come as no surprise that
construction costs never actually declined during the 20082009
financial crisis and ensuing recession. As documented in
Engineering News-Records Construction Cost Index, construction
costs have risen nearly 20% since Spring 2007, and are up an
additional 2.5% in Q2 2013 over Q1. Investors and developers
considering new construction investments should budget for
construction cost increases at double the Consumer Price Index
(CPI) for 2H 2013 and 2014, due to pressures on labor and
materials.
West Coast ILA agreement draws near. And other labor strike
issues loom in trucking and ports in LATAM, Asia and Europe. The
eight-day Los Angeles clerical workers strike last fall
demonstrated how disruptive such stoppages can be to the flow of
goods, and many port tenants now have operational clauses in their
leases that provide for rent relief if cargo cannot move through
the ports. Know whats in your leases.
BLIND SPOT #5: Due Diligence Risk. This is one of the greatest
risks to the industrial market. Sellers are now commanding
shorter and shorter periods of due diligence when selling
properties, owing to the scarcity of available assets, and the
attention that industrials continued performance has brought to the
sector. In 1H 2013 Colliers saw due diligence periods compress to
24 weeks for several warehouse properties that either were in
growth-restricted MSAs or had investment-grade tenants. This
feeding frenzy for institutional-quality warehouse assets is
shifting due diligence risk from the seller to the buyer. Let the
buyer be prepared: have legal, inspection and environmental vendors
ready to go at the drop of a contract, positioned to close in as
little as two weeks.
BLIND SPOT #6: Overlooking adaptive re-use opportunities. Not
all warehouse properties are created equal, and not all markets
can easily develop new supply to relieve demand pressures. As a
result, Colliers is seeing functionally obsolete properties being
acquired for adaptive re-use in growth-restricted port markets. For
example, older manufacturing properties close to the markets port
facilities are being converted to distribution space in cities such
as Los Angeles, San Francisco, Seattle, Miami, Charleston, and New
York. Developers and investors shouldnt overlook these adaptive
reuse opportunities in this feeding frenzy to acquire new
construction.
In conclusion, industrial has proven to be the Little Engine
That Could over the past nine quarters, but the end of the recovery
period means there are plenty of risks in store that could derail
this train as it picks up steam. So keep one hand on the throttle
and one hand on the brake by understanding the warehouse investment
cycle weve entered, and keep your eye on the track ahead.
Conclusion: The Blind Spots
Heres an update on potential risks weve been tracking throughout
the year that you should be aware of:
BLIND SPOT #1: The domestic and global risks heading into 2H
2013 are greater than they were for 1H 2013. Interest rates
have risen approximately 100 basis points this summer ,over fear
of the Federal Reserve tapering its quantitative easing activity at
its September FOMC meeting. And, as Asia slows and Mideast turmoil
increases, the IMF has revised down to 3% its outlook for global
GDP growth.
BLIND SPOT #2: Favoring functionally obsolete warehouse space
over modern, in-demand, distribution centers in post-Panamax era
supply-chain markets. A significant portion of existing U.S.
warehouse space is functionally obsolete (clear heights below 30
feet, less than 60-foot column spacing, etc.), or is located in
markets that will not be central to the post-Panamax supply chain.
Modern distribution centers need 30-foot clear ceiling height for
conveyor systems, as well as connectivity to post-Panamax ports via
intermodal rail and proximity to air cargo centers for e-commerce
fulfillment. Distribution, logistic and e-commerce fulfillment
centers along the paths linking ports, intermodal rail, and air
cargo are your geographic sign posts and investment markers. Be
careful what physical product you invest in, and where. Refer to
Colliers 1H 2013 North American Ports Analysis for more detailed
information, at www.colliers.com/us/port-1H
BLIND SPOT #3: Elevated new construction activity. Although the
Q1 and Q2 increases in construction activity dont indicate a
supply-demand imbalance yet, this metric needs to be monitored
closely over the second half of 2013, given the double-digit
increase in production. Six to eight quarters ago, a similar uptick
in multifamily coincided with another perfect game (vacancy falling
to 5% percent, double-digit rental increases for eight consecutive
quarters, record cap rate compression, etc.), and today the market
is anxious about overbuilding in light of 200,000+ annualized
permits.
BLIND SPOT #4: Port and transportation worker strife. Earlier
this year, an ILA strike was finally averted, and a six-year
dock
workers contract agreed upon for the East and Gulf coast ports.
During the painful six months of uncertainty, retailers and
manufacturers re-routed or accelerated cargo shipments, and may
need to start doing so again on the West Coast at the end of 2013,
as the June 2014 expiration of the existing
-
P. 11 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY
MARKETINVENTORY
JUN. 30, 2013 (SF)
Q2 2013NEW SUPPLY
(SF)
YEAR-TO-DATE NEW SUPPLY
(SF)
CURRENTLY UNDER CONSTRUCTION
(SF)
NORTHEAST
Baltimore, MD 221,822,484 119,620 1,161,620 - Boston, MA
152,836,772 35,000 35,000 1,200,031
Hartford, CT 95,613,351 - 25,747 Long Island, NY 156,537,930 -
190,000 New Jersey Central 353,745,719 - 1,259,244 New Jersey
Northern 374,436,831 - 1,444,817 Philadelphia, PA 413,642,758
1,179,250 1,979,530 1,015,300
Pittsburgh, PA 172,208,978 51,571 178,691 247,731
Washington, DC 265,120,048 130,481 778,167 1,966,299
Northeast Total 2,205,964,871 1,515,922 4,133,008 7,349,169
SOUTH
Atlanta, GA 614,441,825 3,832,655 3,832,655 1,927,256
Birmingham, AL 109,682,848 542,000 Charleston, SC 32,758,481
289,000 616,000 316,000
Charlotte, NC 319,330,062 115,615 354,120 52,000 Columbia, SC
38,123,194 1,200,000
Dallas-Ft. Worth, TX 725,941,193 709,953 1,504,012 6,423,508 Ft.
Lauderdale-Broward, FL 109,506,688 351,614 315,516
Greenville/Spartanburg, SC 177,644,878 156,000
Houston, TX 478,412,510 1,058,764 2,542,228 4,259,723
Jacksonville, FL 122,763,661 92,170 101,770
Little Rock, AR 45,095,202 18,376 18,376
Louisville, KY 170,832,651 15,000
Memphis, TN 218,754,141 869,892 2,417,206
Miami, FL 209,047,911 207,200 1,121,106 1,095,730 Nashville, TN
114,567,001 2,086,660 Orlando, FL 131,536,721 150,000 150,000
1,065,000 Raleigh, NC 110,892,215 20,850 20,850 26,030
Richmond, VA 109,771,478 311,730 458,302
Savannah, GA 44,621,300 200,000 1,131,000
Tampa Bay, FL 197,170,619 152,500 188,019
West Palm Beach, FL 50,339,047 20,900 South Total 4,131,233,626
6,958,813 12,343,944 23,034,529
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 12
UNITED STATES | INDUSTRIAL SURVEY
MARKETINVENTORY
JUN. 30, 2013 (SF)
Q2 2013NEW SUPPLY
(SF)
YEAR-TO-DATE NEW SUPPLY
(SF)
CURRENTLY UNDER CONSTRUCTION
(SF)
MIDWEST
Chicago, IL 1,316,302,590 2,411,337 3,997,878 4,501,811
Cincinnati, OH 244,257,287 697,938 649,000
Cleveland, OH 498,640,441 23,186 23,186 13,300
Columbus, OH 212,366,316 90,800 2,579,936
Detroit, MI 533,982,288 250,000 250,000 356,960
Grand Rapids, MI 112,564,101 281,380 281,380
Indianapolis, IN 275,349,121 52,250 2,069,560 2,207,323
Kansas City, MO-KS 235,220,776 821,000 1,520,040 1,520,040
Milwaukee, WI 224,633,066 112,116 442,691 112,000
Minneapolis/St. Paul, MN 243,653,522 111,000 780,000 828,000
Omaha, NE 67,693,440 77,302
St. Louis, MO 267,789,773 521,718 521,718 436,550 Midwest Total
4,232,452,721 4,583,987 10,675,191 13,282,222
WEST
Albuquerque, NM 36,902,890 242,500
Bakersfield, CA 33,740,065 263,468 284,868 1,807,185
Boise, ID 35,779,701 297,067
Denver, CO 217,449,730 1,031,381 1,031,381 1,365,314
Fairfield, CA 46,594,360 48,133 318,402
Fresno, CA 48,600,000
Honolulu, HI 40,199,159
Las Vegas, NV 109,031,302 489,320 618,320 201,519 Los Angeles,
CA 888,269,000 356,200 356,200 3,028,100
Los Angeles Inland Empire, CA 422,587,000 226,600 1,754,900
12,911,100
Oakland, CA 141,658,055 117,170 117,170 975,015
Orange County, CA 182,822,000 83,100 83,100 408,300
Phoenix, AZ 273,175,760 1,427,704 1,873,696 3,773,026
Pleasanton/Tri-Valley, CA 16,425,448
Portland, OR 191,206,682 142,008 441,090 1,873,838
Reno, NV 82,214,797
Sacramento, CA 175,079,859 131,211 195,000 San Diego, CA
187,080,092 160,479 209,735 59,815
San Francisco Peninsula, CA 40,937,241 38,368 38,368 58,553 San
Jose/Silicon Valley, CA 251,303,594 288,100
Seattle/Puget Sound, WA 261,117,654 441,250 2,109,989
Stockton/San Joaquin County, CA 94,579,012 474,000 530,000
1,017,353
Walnut Creek, CA 17,749,076 West Total 3,794,502,477 4,809,798
8,256,489 30,633,109
U.S. TOTALS 14,364,153,695 17,868,520 35,408,632 74,299,029
(continued)
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P. 13 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY
MARKETABSORPTION
Q2 2013 (SF)
VACANCY RATE MAR. 31, 2013
(%)
VACANCY RATE JUN. 30, 2013
(%)
NORTHEAST
Baltimore, MD 439,790 10.02 9.87
Boston, MA (131,178) 17.58 17.68
Hartford, CT (219,824) 8.81 9.08
Long Island, NY 744,028 6.02 5.54
New Jersey Central 249,929 9.22 9.15
New Jersey Northern (264,668) 8.35 8.42
Philadelphia, PA 1,007,515 9.69 9.70
Pittsburgh, PA 114,947 7.94 7.90
Washington, DC (212,002) 11.58 11.70
Northeast Total 1,728,537 9.76 9.74SOUTH
Atlanta, GA 4,517,579 12.79 12.60
Birmingham, AL 49,899 8.94 8.97
Charleston, SC 329,610 10.32 10.11
Charlotte, NC 1,748,347 12.95 12.43
Columbia, SC 402,250 8.03 6.97
Dallas-Ft. Worth, TX 3,783,365 8.85 8.41
Ft. Lauderdale-Broward, FL 285,229 9.41 9.15
Greenville/Spartanburg, SC 1,428,451 9.85 9.04
Houston, TX 336,116 4.98 5.12
Jacksonville, FL 1,359,652 9.99 8.95
Little Rock, AR 94,346 11.78 11.20
Louisville, KY 534,744 8.72 8.41
Memphis, TN 326,619 12.65 12.49
Miami, FL 321,462 6.71 6.63
Nashville, TN 124,320 9.18 9.12
Orlando, FL 53,820 10.42 10.38
Raleigh, NC (256,246) 10.03 10.27
Richmond, VA 1,096,748 11.24 10.49
Savannah, GA (391,696) 11.66 12.54
Tampa Bay, FL (321,642) 9.96 10.19
West Palm Beach, FL 335,723 8.00 7.34South Total 16,158,696 9.75
9.50
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 14
UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY
MARKETABSORPTION
Q2 2013 (SF)
VACANCY RATE MAR. 31, 2013
(%)
VACANCY RATE JUN. 30, 2013
(%)
MIDWEST
Chicago, IL 199,188 9.00 9.03
Cincinnati, OH 657,162 8.12 7.85
Cleveland, OH 380,066 8.62 8.55
Columbus, OH 1,444,523 8.00 7.32
Detroit, MI 493,882 11.42 11.37
Grand Rapids, MI 280,728 7.14 6.88
Indianapolis, IN 409,946 6.82 6.69
Kansas City, MO-KS 852,939 6.13 6.09
Milwaukee, WI 849,506 7.23 6.96
Minneapolis/St. Paul, MN 756,939 8.13 7.86
Omaha, NE (164,030) 5.08 5.35
St. Louis, MO 940,674 8.39 8.20Midwest Total 7,101,523 8.56
8.45
WEST
Albuquerque, NM 53,347 10.21 10.06
Bakersfield, CA 113,293 3.79 4.35
Boise, ID 848,996 7.84 6.69
Denver, CO 1,824,814 7.80 7.34Fairfield, CA 780,644 10.30
8.69Fresno, CA 200,000 9.05 8.64
Honolulu, HI 135,320 3.56 3.21
Las Vegas, NV 969,393 14.80 14.30
Los Angeles, CA 1,649,700 3.75 3.55
Los Angeles Inland Empire, CA 3,578,100 6.60 5.73
Oakland, CA 1,121,409 7.70 6.98
Orange County, CA 344,600 4.97 4.68
Phoenix, AZ 277,437 12.23 12.58
Pleasanton/Tri-Valley, CA 346,373 9.70 7.59
Portland, OR (627,736) 6.82 7.21
Reno, NV (145,418) 11.79 11.96
Sacramento, CA 1,224,552 13.25 12.61
San Diego, CA 347,598 9.49 9.38
San Francisco Peninsula, CA 295,862 8.20 7.43
San Jose/Silicon Valley, CA 1,845,548 10.16 9.30
Seattle/Puget Sound, WA 540,233 5.65 5.52
Stockton/San Joaquin County, CA 1,114,802 12.58 11.36
Walnut Creek, CA 128,526 9.35 8.63West Total 16,967,393 7.60
7.24
U.S. TOTALS 41,956,149 8.83 8.63
(continued)
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P. 15 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS
OF JUNE 2013
MARKET SALES PRICE (USD PSF)MEDIAN
CAP RATE (%)
VACANCY FORECAST
(3 MONTHS)
ABSORPTION FORECAST
(3 MONTHS)RENT FORECAST
(3 MONTHS)
NORTHEAST
Baltimore, MD 38.55 7.00 Boston, MA 73.00 Hartford, CT 38.00
8.50 Close to zeroLong Island, NY 70.23 7.75 New Jersey Central
85.00 7.20 New Jersey Northern 92.00 6.00 Close to zero
Philadelphia, PA 56.84 7.13 Pittsburgh, PA 50.00 7.75 Washington,
DC 53.28 8.00 Northeast Average* 61.88 7.42
SOUTH
Atlanta, GA 45.33 8.10 Birmingham, AL Charleston, SC 46.00 7.50
Columbia, SC 32.43 Dallas-Ft. Worth, TX 55.00 7.20 Ft.
Lauderdale-Broward, FL 78.75 Greenville/Spartanburg, SC Houston, TX
58.19 8.25 Jacksonville, FL 70.00 7.15 Little Rock, AR 65.45 9.00
Close to zeroMemphis, TN 28.00 Miami, FL 55.00 6.70 Nashville, TN
80.00 8.00 Orlando, FL 50.00 7.50 Richmond, VA 48.00 Savannah, GA
34.00 8.50 Tampa Bay, FL 33.67 West Palm Beach, FL South Average*
51.99 7.79
* Straight averages used.
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 16
UNITED STATES | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS
OF JUNE 2013
MARKET SALES PRICE (USD PSF)MEDIAN
CAP RATE (%)
VACANCY FORECAST
(3 MONTHS)
ABSORPTION FORECAST
(3 MONTHS)RENT FORECAST
(3 MONTHS)
MIDWEST
Chicago, IL 52.00 6.15 Cincinnati, OH 35.00 8.25 Columbus, OH
26.78 Detroit, MI 25.45 12.10 Grand Rapids, MI Indianapolis, IN
45.00 7.00 Close to zero Kansas City, MO-KS 31.00 Milwaukee, WI
50.00 9.00 Minneapolis/St. Paul, MN 27.76 Omaha, NE Close to
zeroMidwest Average* 36.62 8.50
WEST
Albuquerque, NM 84.00 8.00 Bakersfield, CA 38.00 10.00 Boise, ID
Denver, CO 58.00 8.70 Fairfield, CA 7.59 8.00 Fresno, CA 42.00 9.00
Honolulu, HI Las Vegas, NV 52.79 Los Angeles, CA 94.50 6.75 Close
to zero Los Angeles Inland Empire, CA 72.00 6.70 Oakland, CA 114.94
6.00 Orange County, CA 130.00 6.00 Phoenix, AZ 62.00 8.10
Pleasanton/Tri-Valley, CA 100.40 8.25 Portland, OR 79.25 7.10
Sacramento, CA 60.20 8.03 San Diego, CA San Francisco Peninsula, CA
103.18 San Jose/Silicon Valley, CA 275.00 7.00 Seattle/Puget Sound,
WA 105.00 6.00 Stockton/San Joaquin County, CA 118.55 8.00 Walnut
Creek, CA West Average* 88.74 7.60 U.S. AVERAGE* 64.54 7.73
(continued)
* Straight averages used.
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P. 17 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | RENTS AS OF JUNE 2013
MARKETWAREHOUSE/DISTRIBUTION
SPACE (USD PSF)
BULK SPACE
(USD PSF)
FLEX/SERVICE SPACE
(USD PSF)
TECH/R&D SPACE
(USD PSF)
NORTHEAST
Baltimore, MD 4.72 4.39 9.72
Boston, MA 6.04 5.30 6.54 11.44
Hartford, CT 4.42 4.42 6.50 6.50
Long Island, NY 8.28 10.00 16.60
New Jersey Central 4.62 4.12 12.19 12.19
New Jersey Northern 6.29 5.95 9.92 12.26
Philadelphia, PA 4.25 4.15 7.00 11.00
Pittsburgh, PA 4.34 4.34 11.58 11.58
Washington, DC 6.99 5.87 11.54 15.17
Northeast Average* 5.55 5.39 10.18 11.45
SOUTH
Atlanta, GA 3.26 2.94 7.05 10.42
Birmingham, AL 3.85 3.60 8.40
Charleston, SC 3.85 4.30 6.25 16.25
Charlotte, NC 3.38 3.20 8.77
Columbia, SC 3.54 2.93 7.41
Dallas-Ft. Worth, TX 3.20 2.70 7.00 8.50
Ft. Lauderdale-Broward, FL 6.25 5.82 9.55 7.95
Greenville/Spartanburg, SC 3.02 2.99 6.82
Houston, TX 5.38 4.44 8.10 10.77
Jacksonville, FL 3.81 3.50 8.57
Little Rock, AR 2.68 2.74 7.35
Louisville, KY 3.50 3.44 7.50 6.00
Memphis, TN 2.45 2.57 5.06 9.50
Miami, FL 8.06 7.79 10.59 12.00
Nashville, TN 3.05 7.65 8.62 7.50
Orlando, FL 4.43 4.25 8.16 8.49
Raleigh, NC 3.76 3.90 10.09
Richmond, VA 3.50 3.57 7.67 7.65
Savannah, GA 3.95 3.75 7.00 10.00
Tampa Bay, FL 4.22 3.89 7.14 5.60
West Palm Beach, FL 6.78 6.18 10.87 7.00 South Average* 4.09
4.10 8.00 9.12
* Straight averages used.
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 18
UNITED STATES | INDUSTRIAL SURVEY | RENTS AS OF JUNE 2013
MARKETWAREHOUSE/DISTRIBUTION
SPACE (USD PSF)
BULK SPACE
(USD PSF)
FLEX/SERVICE SPACE
(USD PSF)
TECH/R&D SPACE
(USD PSF)
MIDWEST
Chicago, IL 3.92 3.38 7.14
Cincinnati, OH 3.17 2.67 6.37 6.37
Cleveland, OH 3.35 2.95 7.91
Columbus, OH 2.70 2.65 5.12 5.12
Detroit, MI 3.85 3.57 7.34 7.34
Grand Rapids, MI 3.25 3.10 4.45 4.45
Indianapolis, IN 4.40 3.20 6.75
Kansas City, MO-KS 4.27 3.56 8.94 7.36
Milwaukee, WI 4.33 3.54 5.74
Minneapolis/St. Paul, MN 4.50 6.43 7.12
Omaha, NE 4.14 5.00 6.36 6.36
St. Louis, MO 3.77 3.69 7.91
Midwest Average* 3.80 3.39 6.71 6.30
WEST
Albuquerque, NM 5.48 4.27 8.75 8.75
Bakersfield, CA 4.00 3.42 8.00
Boise, ID 4.92 4.92 6.10 5.76
Denver, CO 5.36 3.99 8.48 9.50 Fairfield, CA 5.34 5.57 8.18
8.82
Fresno, CA 3.84 3.60 4.80 5.50
Honolulu, HI 12.00
Las Vegas, NV 6.00 4.22 5.52 7.32
Los Angeles, CA 6.38 6.20 9.85 12.75
Los Angeles Inland Empire, CA 4.75 4.55 7.10 7.75
Oakland, CA 4.92 4.64 5.52 8.52
Orange County, CA 7.20 6.60 12.84 13.80
Phoenix, AZ 5.30 4.52 10.84 10.72
Pleasanton/Tri-Valley, CA 5.16 4.20
Portland, OR 5.62 5.17 9.74 10.49
Reno, NV 3.71 3.25 7.75
Sacramento, CA 4.32 4.80 8.76 4.44
San Diego, CA 8.04 7.44 10.56 14.64
San Francisco Peninsula, CA 10.32 10.32 23.40 23.40
San Jose/Silicon Valley, CA 6.48 6.01 9.00 16.20
Seattle/Puget Sound, WA 5.88 5.04 13.37
Stockton/San Joaquin County, CA 3.84 3.36 6.24 8.64
Walnut Creek, CA 2.52 13.80 West Average* 5.71 5.05 8.97
10.60
U.S. AVERAGE* 4.81 4.49 8.38 9.62
(continued)
* Straight averages used.
-
P. 19 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
CANADA | INDUSTRIAL SURVEY
MARKETINVENTORY
JUN. 30, 2013 (SF)
Q2 2013NEW SUPPLY
(SF)
YEAR-TO-DATENEW SUPPLY
(SF)
CURRENTLY UNDERCONSTRUCTION
(SF)
Calgary, AB 127,425,545 1,676,070 2,195,420 1,545,215 Edmonton,
AB 80,053,480 631,677 831,827 1,989,133
Halifax, NS 7,614,336 448,477 456,102 87,000 Montral, QC
347,959,380 180,000
Ottawa, ON 28,134,055 64,000 47,500
Regina, SK 16,973,560 44,774 84,774 250,000
Saskatoon, SK 21,300,000 216,000 460,000 350,000
Toronto, ON 760,223,794 1,606,986 1,676,986 4,691,333
Vancouver, BC 184,000,129 939,051 1,612,102 2,437,810
Victoria, BC 9,001,303 78,790
Waterloo Region, ON 60,281,392 103,794 108,594 61,707 Winnipeg,
MB 79,832,082 140,000 140,000 50,000
CANADA TOTALS 1,722,799,056 5,806,829 7,708,595 11,689,698
CANADA | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY
MARKETABSORPTION
Q2 2013 (SF)
VACANCY RATE MAR. 31, 2013
VACANCY RATE JUN. 30, 2013
Calgary, AB 671,241 4.72 5.45Edmonton, AB 39,165 3.34 4.05
Halifax, NS (28,387) 9.65 10.15
Montral, QC (26,169) 4.50 4.49
Ottawa, ON 133,127 5.76 5.50
Regina, SK (15,226) 2.96 3.30
Saskatoon, SK 276,000 5.50 5.16
Toronto, ON (1,576,682) 3.89 4.11
Vancouver, BC (174,411) 3.50 4.09
Victoria, BC (33,423) 4.23 4.50
Waterloo Region, ON 495,397 6.65 6.05Winnipeg, MB (247,332) 2.97
3.45
CANADA TOTALS (486,700) 4.13 4.37
Millions
-1.58 -0.25
-0.17 -0.03 -0.03 -0.03 -0.02
0.04 0.13
0.28 0.50
0.67 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0
Toronto, ON
Winnipeg, MB
Vancouver, BC
Victoria, BC
Halifax, NS
Montral, QC
Regina, SK
Edmonton, AB
Ottawa, ON
Saskatoon, SK
Waterloo Region, ON
Calgary, AB
ABSORPTION (SF) | CANADIAN MARKETS | Q2 2013
-0.39
0.20
0.41
0.49
1.65
3.58
3.78
4.52
-1.0 0.0 1.0 2.0 3.0 4.0 5.0
Savannah, GA
Chicago, IL
Indianapolis, IN
Detroit, MI
Los Angeles, CA
Los Angeles - Inland Empire, CA
Dallas-Ft. Worth, TX
Atlanta, GA
Millions
ABSORPTION (SF) | SELECT U.S. MARKETS | Q2 2013
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 20
* Straight averages used.
CANADA | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF JUNE
2013
MARKET SALES PRICE (CAD PSF)MEDIAN
CAP RATE (%)
VACANCY FORECAST (3 MONTHS)
ABSORPTION FORECAST
(3 MONTHS)RENT FORECAST
(3 MONTHS)
Calgary, AB 170.00 6.50 Edmonton, AB 125.00 6.72 Halifax, NS
7.25 Montral, QC 68.00 7.25 Ottawa, ON 110.00 7.50 Close to
zeroRegina, SK 130.00 7.30 Saskatoon, SK 150.00 7.15 Toronto, ON
90.00 7.30 Vancouver, BC 187.00 6.00 Close to zeroVictoria, BC
170.00 7.00 Close to zeroWaterloo Region, ON 66.00 7.10 Winnipeg,
MB 71.00 8.25 Close to zeroCANADA AVERAGE* 121.55 7.11
CANADA | INDUSTRIAL SURVEY | RENTS AS OF JUNE 2013
MARKETWAREHOUSE/DISTRIBUTION
SPACE (CAD PSF)
BULK SPACE
(CAD PSF)
FLEX/SERVICE SPACE
(CAD PSF)
TECH/R&D SPACE
(CAD PSF)
Calgary, AB 9.00 7.50 12.00 12.00 Edmonton, AB 8.00 7.50 10.00
12.00
Halifax, NS 7.80 7.17 10.50 15.00
Montral, QC 4.75 4.25 6.00 8.00
Ottawa, ON 8.25 7.50 8.50 11.00
Regina, SK 10.00 10.00 12.00 14.00
Saskatoon, SK 10.00 9.00 13.00 15.00
Toronto, ON 4.88
Vancouver, BC 7.76 7.30 9.50 14.00
Victoria, BC 11.50 10.00 13.50 13.50
Waterloo Region, ON 4.53 3.77 8.28 8.28 Winnipeg, MB 6.25 5.25
10.00 12.75
CANADA AVERAGE* 7.73 7.20 10.30 12.32
-
HIGHLIGHTS | Q2 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 21
INDUSTRIAL VACANCY RANKINGS | US
MARKETVACANCY RATEJUN 30, 2013
(%)Honolulu, HI 3.21Los Angeles, CA 3.55Bakersfield, CA
4.35Orange County, CA 4.68Houston, TX 5.12Omaha, NE
5.35Seattle/Puget Sound, WA 5.52Long Island, NY 5.54Los Angeles -
Inland Empire, CA 5.73Kansas City, MO-KS 6.09Miami, FL 6.63Boise,
ID 6.69Indianapolis, IN 6.69Grand Rapids, MI 6.88Milwaukee, WI
6.96Columbia, SC 6.97Oakland, CA 6.98Portland, OR 7.21Columbus, OH
7.32West Palm Beach, FL 7.34Denver, CO 7.34San Francisco Peninsula,
CA 7.43Pleasanton/Tri-Valley, CA 7.59Cincinnati, OH
7.85Minneapolis/St. Paul, MN 7.86Pittsburgh, PA 7.90St. Louis, MO
8.20Louisville, KY 8.41Dallas-Ft. Worth, TX 8.41New Jersey -
Northern 8.42Cleveland, OH 8.55Walnut Creek, CA 8.63UNITED STATES
AVERAGE 8.63Fresno, CA 8.64Fairfield, CA 8.69Jacksonville, FL
8.95Birmingham, AL 8.97Chicago, IL 9.03Greenville/Spartanburg, SC
9.04Hartford, CT 9.08Nashville, TN 9.12New Jersey - Central 9.15Ft.
Lauderdale-Broward, FL 9.15San Jose/Silicon Valley, CA 9.30San
Diego, CA 9.38Philadelphia, PA 9.70Baltimore, MD 9.87Albuquerque,
NM 10.06Charleston, SC 10.11Tampa Bay, FL 10.19Raleigh, NC
10.27Orlando, FL 10.38Richmond, VA 10.49Little Rock, AR
11.20Stockton/San Joaquin County, CA 11.36Detroit, MI
11.37Washington, DC 11.70Reno, NV 11.96Charlotte, NC 12.43Memphis,
TN 12.49Savannah, GA 12.54Phoenix, AZ 12.58Atlanta, GA
12.60Sacramento, CA 12.61Las Vegas, NV 14.30Boston, MA 17.68
INDUSTRIAL VACANCY RANKINGS | CANADA
MARKETVACANCY RATE JUN 30, 2013
(%)Regina, SK 3.30Winnipeg, MB 3.45Edmonton, AB 4.05Vancouver,
BC 4.09Toronto, ON 4.11CANADA AVERAGE 4.37Montral, QC 4.49Victoria,
BC 4.50Saskatoon, SK 5.16Calgary, AB 5.45Ottawa, ON 5.50Waterloo
Region, ON 6.05Halifax, NS 10.15
COLLIERS INTERNATIONAL601 Union Street, Suite 4800Seattle, WA
98101TEL +1 206 695 4200
FOR MORE INFORMATION
K.C. Conway Chief Economist | USATEL + 1 678 458 3477EMAIL
[email protected]
James CookDirector of Research | USA TEL +1 602 633 4061 EMAIL
[email protected]
CONTRIBUTORS
Jeff Simonson Senior Research Analyst | USA
Jennifer Macatiag Graphic Designer | USA
Cliff Plank National Director | GIS & Mapping
Aaron Finkelstein Communications Manager | USA
482 offices in 62 countries on 6 continentsUnited States:
140Canada: 42Latin America: 20Asia Pacific: 195EMEA: 85
$2 billion in annual revenue
13,500 professionals and staff
1.12* billion square feet under management
$71 billion USD in total transaction value*Together, Colliers
International and FirstService manage 2.51 billion square feet of
property second-largest in the world.
Copyright 2013 Colliers International.
The information contained herein has been obtained from sources
deemed reliable. While every reasonable effort has been made to
ensure its accuracy, we cannot guarantee it. No responsibility is
assumed for any inaccuracies. Readers are encouraged to consult
their professional advisors prior to acting on any of the material
contained in this report.
Accelerating success.
GlossaryAbsorption Net change in occupied space over a given
period of time.
Bulk Space Warehouse space 100,000 square feet or more with
minimum ceiling heights of 24 feet. All loading is dock-height.
Flex Space Single-story buildings having 10- to 18-foot ceilings
with both floor-height and dock-height loading. Includes wide
variation in office space utilization, ranging from retail and
personal service, to distribution, light industrial and occasional
heavy industrial use.
Inventory Includes all existing multi- or single-tenant leased
and owner-occupied industrial warehouse, light manufacturing, flex
and R&D properties greater than or equal to 10,000 square
feet.
New Construction Includes completed speculative and
build-to-suit construction. New construction quoted on a net basis
after any demolitions or conversions.
Service Space Single-story (or mezzanine) with 10- to 16-foot
ceilings with frontage treatment on one side and dock-height
loading or grade-level roll-up doors on the other. Less than 15
percent office space.
Tech/R&D One- and two-story, 10- to 15-foot ceiling heights
with up to 50 office/dry lab space (remainder in wet lab, workshop,
storage and other support), with dock-height and floor-height
loading.
Triple Net Rent Includes rent payable to the landlord, and does
not include additional expenses such as taxes, insurance,
maintenance, janitorial and utilities. All industrial and
high-tech/R&D rents in this report are quoted on an annual,
triple net per square foot basis in U.S. and Canadian dollars.
Vacancy Rate Percentage of total inventory available (both
vacant and occupied) as at the survey date including direct vacant
and sublease space.
Warehouse 50,000 square feet or more with up to 15 percent
office space, the balance being general warehouse space with 18- to
30-foot ceiling heights. All loading is dock-height.