cushmanwakefield.com | 1 U.S. Industrial Q1 2018 MARKETBEAT U.S. INDUSTRIAL Overall Vacancy Net Absorption/Rent NNN 4-QTR TRAILING AVERAGE Market Indicators Q1 17 Q1 18 12-Month Forecast Overall Vacancy 5.3% 5.0% Net Absorption 56.5M 56.9M Under Construction 218.4M 251.3M Weighted Asking Rent (NNN) $5.68 $5.99 Rent Growth (Yr/Yr % Chg.) 4.1% 5.4% Employment Indicators Q1 17 Q1 18 12-Month Forecast Total Nonfarm Employment 145.8M 148.1M Industrial Employment 31.5M 32.3M Unemployment 4.7% 4.1% $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 0 10 20 30 40 50 60 70 80 2014 2015 2016 2017 2018 Net Absorption, MSF Weighted Asking Rent, $ PSF Forecast 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 2014 2015 2016 2017 2018 Historical Average = 8.4% Forecast No Signs of Slowing Strong Start: U.S. industrial markets absorbed 56.9 million square feet (msf) in the first quarter of 2018 (Q1 2018), making it the fourth strongest start to a year of the past 30 years; only the record-setting 2016 and prior cycle highs of 2007 and 1999 were stronger. Each U.S. region performed well during the quarter, with the South and West leading absorption gains and the Northeast posting the greatest year-over-year improvement. Absorption in the Midwest remained solid, in line with 2016/2017 tallies. Leasing velocity accelerated in half of the U.S. markets, with more than three-quarters of the country registering net occupancy gains. Demand for U.S. industrial space is expected to remain strong throughout 2018, with quarterly net absorption forecast to average 58.1 msf. While that forecast is lower than the quarterly average of 61.6 msf of actual net absorption in 2017, it is higher than the 56.4 msf of quarterly net absorption of the past seven years. Broad-Based Gains: Occupancy gains were broad-based in Q1 2018, with logistics product absorbing 51.0 msf, manufacturing footprints expanding by 2.4 msf, and flex growing by 2.9 msf. The Midwest led manufacturing and flex activity, while the West and South regions had the strongest warehouse performance. Logistics-related leasing was driven by the Inland Empire, Pennsylvania I-81/I-78 Distribution Corridor, Atlanta, Central New Jersey, Dallas, Miami and Kansas City; these markets combined accounted for more than half the nation’s warehouse absorption. Chicago, Philadelphia, San Jose, Cincinnati, and Hartford registered the best performance in manufacturing product. For flex space, Salt Lake City, Miami, Detroit, Milwaukee, Pittsburgh, Kansas City, and Minneapolis accounted for nearly 90% of the segment’s growth. Nowhere to Go: The industrial market continued to tighten in Q1 2018 with vacancy rates falling in two-thirds of the country. At 5.0%, the U.S. overall vacancy rate is a full 330 basis points (bps) below the 10-year historical average of 8.4% for all product types. The tightest U.S. markets include Savannah, Los Angeles, San Francisco, Orange County, Fort Myers/Naples, San Jose, Central New Jersey and El Paso, all of which have headline vacancy rates of 3% or lower. Logistics-related vacancy declined by 10 bps in Q1 2018 despite the delivery of 43.3 msf of speculative warehouse product. Space options are particularly tight in the 100,000-to-250,000-square-foot size segment where new supply has lagged, and leasing demand has recently spiked. Deal volume by tenants taking space in the 250,0000-to-500,000-square-foot segments was up 16.9% in the quarter, while activity in the bulk segment of 500,000-square-feet and above continued to decline gradually from its Q3 2017 peak. The amount of available logistics space and its characteristics will remain a key storyline in 2018: 61.2% of available logistics space is more than 20 years old, and over half of it possesses clear heights below 28 feet. That presents limited options for tenants seeking modern space. Rents Rising Faster: Rent growth accelerated in Q1 2018, with more room to run. U.S. industrial rents increased 5.4% in Q1 2018 from a year ago, rising in 59 of 79 markets tracked by Cushman & Wakefield; 19 markets reported double-digit gains. Among the regions, year-over-year rent growth was strongest in the South (7.1%) and West (6.0%) and more moderate in the Midwest (4.9%) and Northeast (4.1%). The highest rent growth was in Seattle, Sacramento, San Francisco, Jacksonville, Nashville, Raleigh/Durham and Oakland—all markets where rents increased more than 14% year-over-year. Although overall industrial rents currently stand at a record high of $5.99 per square foot (psf), on an inflation-adjusted basis they remain 4.9% below the level at the height of the last cycle. Strong occupier demand for high-quality space and infill sites capable Source: Cushman & Wakefield Research Source: BLS
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Strong Start: U.S. industrial markets absorbed 56.9 million square feet (msf) in the first quarter of 2018 (Q1 2018), making it the fourth strongest start to a year of the past 30 years; only the record-setting 2016 and prior cycle highs of 2007 and 1999 were stronger. Each U.S. region performed well during the quarter, with the South and West leading absorption gains and the Northeast posting the greatest year-over-year improvement. Absorption in the Midwest remained solid, in line with 2016/2017 tallies. Leasing velocity accelerated in half of the U.S. markets, with more than three-quarters of the country registering net occupancy gains. Demand for U.S. industrial space is expected to remain strong throughout 2018, with quarterly net absorption forecast to average 58.1 msf. While that forecast is lower than the quarterly average of 61.6 msf of actual net absorption in 2017, it is higher than the 56.4 msf of quarterly net absorption of the past seven years.
Broad-Based Gains: Occupancy gains were broad-based in Q1 2018, with logistics product absorbing 51.0 msf, manufacturing footprints expanding by 2.4 msf, and flex growing by 2.9 msf. The Midwest led manufacturing and flex activity, while the West and South regions had the strongest warehouse performance. Logistics-related leasing was driven by the Inland Empire, Pennsylvania I-81/I-78 Distribution Corridor, Atlanta, Central New Jersey, Dallas, Miami and Kansas City; these markets combined accounted for more than half the nation’s warehouse absorption. Chicago, Philadelphia, San Jose, Cincinnati, and Hartford registered the best performance in manufacturing product. For flex space, Salt Lake City, Miami, Detroit, Milwaukee, Pittsburgh, Kansas City, and Minneapolis accounted for nearly 90% of the segment’s growth.
Nowhere to Go: The industrial market continued to tighten in Q1 2018 with vacancy rates falling in two-thirds of the country. At 5.0%, the U.S. overall vacancy rate is a full 330 basis points (bps) below the 10-year historical average of 8.4% for all product types. The tightest U.S. markets include Savannah, Los Angeles, San Francisco, Orange County, Fort Myers/Naples, San Jose, Central New Jersey and El Paso, all of which have headline vacancy rates of 3% or lower. Logistics-related vacancy declined by 10 bps in Q1 2018 despite the delivery of 43.3 msf of speculative warehouse product. Space options are particularly tight in the 100,000-to-250,000-square-foot size segment where new supply has lagged, and leasing demand has recently spiked. Deal volume by tenants taking space in the 250,0000-to-500,000-square-foot segments was up 16.9% in the quarter, while activity in the bulk segment of 500,000-square-feet and above continued to decline gradually from its Q3 2017 peak. The amount of available logistics space and its characteristics will remain a key storyline in 2018: 61.2% of available logistics space is more than 20 years old, and over half of it possesses clear heights below 28 feet. That presents limited options for tenants seeking modern space.
Rents Rising Faster: Rent growth accelerated in Q1 2018, with more room to run. U.S. industrial rents increased 5.4% in Q1 2018 from a year ago, rising in 59 of 79 markets tracked by Cushman & Wakefield; 19 markets reported double-digit gains. Among the regions, year-over-year rent growth was strongest in the South (7.1%) and West (6.0%) and more moderate in the Midwest (4.9%) and Northeast (4.1%). The highest rent growth was in Seattle, Sacramento, San Francisco, Jacksonville, Nashville, Raleigh/Durham and Oakland—all markets where rents increased more than 14% year-over-year. Although overall industrial rents currently stand at a record high of $5.99 per square foot (psf), on an inflation-adjusted basis they remain 4.9% below the level at the height of the last cycle. Strong occupier demand for high-quality space and infill sites capable
Source: Cushman & Wakefield Research
Source: BLS
cushmanwakefield.com | 2
U.S. IndustrialQ1 2018
MARKETBEAT
Development Pipeline Is Growing UNDER CONSTRUCTION (MSF)
Supply Will Not Run Away From Demand DELIVERIES BY TYPE AND NET ABSORPTION (MSF)
Outlook• Demand drivers point to growth in 2018 with strong absorption
in markets with sufficient supply and robust rent growth in markets facing supply constraints.
• We forecast total retail and food sales to accelerate to 5.2%, and for eCommerce sales to grow by 16.4%, in 2018.
• Net absorption is expected to surpass 230 msf in 2018 for the third year in a row, and eclipse 200 msf in 2019 for a sixth year.
• Developers will exercise caution, with deliveries modestly outpacing demand, allowing vacancy rates to hover in the 5% range through 2018/2019.
• Rent growth will remain strong in 2018, softening slowly late in the year with rent growth gradually decelerating in 2019.
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
of supporting omnichannel fulfillment amid a historically tight market mean 2018 is expected to be another year of robust rent growth.
Development Picking Up: New construction starts rose by 3.6% nationally in Q1 2018 with 42 markets reporting development levels increasing quarter-over-quarter. The largest uptick in construction activity occurred in the South and West regions, as is often the case during any first quarter when seasonality limits activity in the Northeast and Midwest. Currently, there is 251.3 msf of industrial product under construction, of which 164.1 msf is speculative. Although five markets—Inland Empire, Dallas, Pennsylvania I-81/I-78 Distribution Corridor, Atlanta, and Central Valley California—account for over one-third of the development pipeline, 47 markets have more than 1 msf under construction. Activity is expected to increase, but increasing construction costs, scarcity of entitled land and labor, discerning lenders, and caution among developers diminished the likelihood that supply will outstrip demand.
Full Speed AheadDemand Drivers Look Great: Economic fundamentals remain solid, underpinned by a strong job market. An average of 202,000 new jobs have been created every month in 2018—more than the monthly averages in both 2016 and 2017. Industrial output rose 3.2% in the six months ending February—the largest 6-month growth rate for any period since 2010. Intermodal rail volume—which correlates closely with warehouse demand—rolled to its second highest weekly average ever in February, and March volume following was the strongest March on record. Strength is also evident in U.S. retail sales for March, which recorded an increase in sales at auto dealers, furniture and home stores, and electronic and appliance sellers.
Trade Rhetoric vs. Reality: Trade rhetoric has roiled equity markets and interjected a layer of complexity for logisticians. Trade reality is much different than the rhetoric. Little formal trade policy has taken effect and many countries initially subjected to steel and aluminum tariffs have received exemptions. NAFTA negotiations are showing signs of promise, and recent dialogue between the U.S. and China has taken a more conciliatory tone. Trade policy and geopolitical threats will remain headwinds but a strong job market, rising incomes that allow consumers to purchase more, elevated confidence that emboldens them to spend, and strong corporate earnings that encourage businesses to invest all point to stronger growth in 2018.
Inventory Inventory Deliveries YTD 2018 Under Construction as of Q1 2018p
Nashville, TN 207,732,278 0 4,505,896
New Haven, CT 47,972,701 80,500 855,000
New Jersey - Central 341,840,626 1,873,715 7,398,822
New Jersey - Northern 285,915,667 591,665 1,235,519
Northern VA 61,757,118 266,719 370,850
Oakland/East Bay, CA 205,166,608 391,834 2,915,424
Oklahoma City, OK 71,654,890 20,046 0
Omaha, NE 68,150,732 33,600 1,698,262
Orange County, CA 283,638,824 0 1,520,658
Orlando, FL 118,645,912 705,005 1,639,228
Palm Beach County, FL 41,501,932 166,392 146,253
PA I-81/I-78 Distribution Corridor 268,806,266 4,527,469 17,261,326
Philadelphia, PA 139,818,225 0 3,573,850
Phoenix, AZ 312,048,160 1,487,709 4,943,167
Pittsburgh, PA 168,467,168 150,282 143,500
Portland, OR 198,398,446 839,323 3,487,528
Providence, RI 77,727,305 0 0
Puget Sound - Eastside 60,756,319 0 726,294
Raleigh/Durham, NC 53,576,565 136,500 159,600
Richmond, VA 95,136,133 95,000 820,447
Roanoke, VA 50,835,950 0 0
Rochester, NY 73,551,473 0 0
Sacramento, CA 140,877,069 0 934,770
Salt Lake City, UT 124,177,486 477,759 3,634,305
San Antonio, TX 39,429,211 0 1,573,429
San Diego, CA 162,528,199 0 3,290,206
San Francisco North Bay, CA 25,432,841 0 422,128
San Francisco Peninsula, CA 41,886,372 0 0
San Jose (Silicon Valley), CA 85,419,650 0 634,118
Savannah, GA 55,642,703 0 3,388,742
Seattle, WA 190,166,201 540,606 4,322,323
Southern New Hampshire 48,200,877 1,240,000 0
St. Louis, MO 243,357,856 693,940 6,291,359
St. Petersburg/Clearwater, FL 47,780,757 0 126,000
Suburban MD 50,136,334 0 458,910
Syracuse, NY 42,742,578 0 179,605
Tampa, FL 80,141,279 137,500 1,094,270
Tucson, AZ 42,954,286 0 242,734
Tulsa, OK 92,259,935 171,078 347,080
p = preliminary
Methodology
Cushman & Wakefield’s quarterly estimates are derived from a variety of data sources, including its own proprietary database, and historical data from third party data sources. The market statistics are calculated from a base building inventory made up of industrial properties deemed to be competitive in the local industrial markets. Generally, owner-occupied and federally-owned buildings are not included. Older buildings unfit for occupancy or ones that require substantial renovation before tenancy are generally not included in the competitive inventory. The inventory is subject to revisions due to resampling. Vacant space is defined as space that is available immediately or imminently after the end of the quarter. Sublet space still occupied by the tenant is not counted as available space. The figures provided for the current quarter are preliminary, and all information contained in the report is subject to correction of errors and revisions based on additional data received.
Regional Map
WestMidwestSouthNortheast
Jason Tolliver Head of Logistics & Industrial Research Americas Tel: +1 317.639.0549 cushmanwakefield.com
Explanation of Terms
Total Inventory: The total amount of industrial space (in buildings of a
predetermined size by market) that can be rented by a third party.
Overall Vacancy Rate: The amount of unoccupied space (new, relet, and
sublet) expressed as a percentage of total inventory.
Absorption: The net change in occupied space between two points in time.
(Total occupied space in the present quarter minus total occupied space from
the previous quarter, quoted on a net, not gross, basis.)
Leasing Activity: The sum of all leases over a period of time. This includes
pre-leasing activity as well as expansions. It does not include renewals.
Overall Weighted Asking Rents: NNN average asking rents weighted by the
amount of available direct and sublease space in industrial properties.
W/D: Warehouse and or distribution properties.
MFG: Manufacturing properties.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm with 45,000 employees in more than 70 countries helping occupiers and investors optimize the value of their real estate. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
Cushman & Wakefield Copyright 2018. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by the property owner(s). As applicable, we make no representation as to the condition of the property (or properties) in question.
Another Banner Year: U.S. industrial markets absorbed 63.3 million square feet (msf) in the fourth quarter of 2017, boosting net occupancy gains for the year to over 246.3 msf. The U.S. industrial market has now recorded over 240 msf of absorption for four consecutive years—the strongest run on record. The national industrial vacancy rate held at 5.1% for all product types—the lowest rate on record—with market conditions tightening slightly in the Midwest and South. The greatest growth markets in 2017 were Dallas/Ft Worth, Atlanta, the Inland Empire, Chicago and the Pennsylvania I-81/I-78 Distribution Corridor, and together they accounted for 38% of overall U.S. net absorption.
Firing on All Cylinders: Every industrial segment remained in growth mode. Through Q4 2017, warehouse product posted 224.9 msf of net absorption, manufacturing registered 10.2 msf of growth, flex occupancy grew by 7.2 msf and high technology occupancy increased by 2.4 msf. The current industrial expansion is one for the record book. As of January 2018, the industrial sector has registered 31 consecutive quarters of net occupancy gains—the longest expansion ever. It is also among the strongest with net absorption since 2010 surpassing 1.4 trillion square feet.
Tight Conditions: At 5.1%, the U.S. industrial vacancy rate is a full 330 basis points (bps) below the 10-year historical average of 8.4% for all product types. The warehouse market remains tight with vacancy tracking at 5.2% in Q4 2017. Over the past year, logistics-related vacancy has declined 50 bps (from 5.7% to 5.2%) despite the delivery of 168.6 msf of new speculative warehouse product. Strikingly, warehouse vacancy rates remain below prior cycle lows in many industrial markets, with conditions tightening further in Q4 2017 as rates track below 5% in nearly half of all U.S. markets. At year-end 2017, the tightest U.S. markets included Savannah, Los Angeles, Orange County, the San Francisco Peninsula, and Oakland/East Bay, all of which have vacancy rates at 3% or below.
Rents Continue to Run: Healthy demand from logistics and distribution users is fueling rent growth. U.S. industrial rents increased 3.7% in Q4 2017 from a year ago to a record high of $5.84 per square foot (psf). Industrial rents rose in 62 of 79 markets tracked by Cushman & Wakefield during the same period, with many port-proximate industrial markets reporting double-digit gains. Among the regions, year-over-year rent growth in Q4 2017 was strongest in the West (6.1%), followed by the Midwest (4.4%), South (4.1%) and Northeast (2.6%). Rent growth was strongest in Jacksonville, San Francisco, Nashville, Raleigh/Durham, Oakland/East Bay and Seattle—all markets where rents grew more than 12% in 2017.
Conservative Development: New construction starts rose slightly—by 3.5%—in Q4 2017. Currently, there is 242.5 msf of industrial product under construction, of which 161.6 msf is speculative. Although development remains concentrated in major industrial markets, 42 of the 79 markets tracked have over 1 msf under construction. Given the tight market conditions and strong underlying fundamentals, developers are expected be conservative in breaking ground on additional speculative projects, which will slowly bring supply and demand fundamentals closer into balance. Nevertheless, concern over the length of the current economic cycle, the increased institutional nature of developers and financial partners, and lack of land and rising construction costs are likely to prevent dramatic increases in speculative development in most markets.
Source: Cushman & Wakefield Research
Source: BLS
cushmanwakefield.com | 2
U.S. IndustrialQ4 2017
MARKETBEAT
Demand in Line with Supply in Many Markets 2017 NET ABSORPTION & NEW DELIVERIES (ALL TYPES, % OF INVENTORY)
Rebalancing of Vacancy Will Occur Slowly CURRENT CONSTRUCTION COMPARED TO 5-YR ABSORPTION AVERAGE
Few Signs of Overbuilding 2017 DELIVERIES BY TYPE & YEAR-OVER-YEAR CHANGE IN VACANCY
Outlook• Logistics-related leasing will continue to benefit from solid
economic fundamentals that spur increased consumer spending.
• Net absorption will once again surpass 200 msf for a fifth year in a row.
• Increased speculative supply will place upward pressure on vacancy as supply/demand begin to slowly rebalance. We forecast average annual vacancy to rise 20 bps in 2018 to 5.3% for all industrial product types.
• Rental rate appreciation will continue, although rent growth will slowly begin to decelerate in 2018. We anticipate average annual rent gains of 2.9% in 2018 for all industrial product types.
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
Don’t Bet Against the U.S. Economy, More Upside than Downside
Solid Footing: The U.S. economy and industrial market are positioned to perform well in 2018. For the fourth quarter, job gains averaged 204,000 a month, the most since the third quarter of 2016. For all of 2017, U.S. firms created nearly 2.1 million net new jobs, down from 2.2 million in 2016 but almost equal to the 2012-2016 average. Renewed confidence in the economy and higher levels of real discretionary income are anticipated to boost retail sales while a stronger U.S. housing market will buttress leasing demand among firms associated with home building and furnishings. Stronger global growth is also expected to support economic growth and leasing fundamentals. In short, the U.S. economy and industrial market enter 2018 on the strongest footing of any year in the current expansion with few signs of slowing.
Paying-Up: Since 2016, the Employment Cost Index—a quarterly economic series detailing the changes in the costs of labor for businesses in the economy—has risen at a faster pace for warehouse workers than for all civilian workers. This trend is mirrored in forecasts for income: the largest growth in real per capita income is projected to be in industrial markets, particularly those in Florida and distribution-centric markets in Pennsylvania and the Midwest. Since labor typically accounts for at least half of traditional warehouse operating costs, the relationship between labor costs and warehouse operations will remain a key theme in 2018, with occupiers increasingly required to pay-up to ramp-up or keep-up warehousing and fulfillment operations.
Churning it Out: The U.S. manufacturing sector ended 2017 on a strong note with the ISM manufacturing index rising to 59.7 in December—the second fastest pace of expansion in six years. Buoyed by both domestic and international demand, new orders are surging at their fastest pace in more than 13 years. The ISM index expanded at a torrid pace in the third and fourth quarters of 2017. Since August 2017, the index has consistently tracked above 58.2, a rare occurrence. The only other period in the past 40 years that the ISM registered 58 or higher for that many consecutive months was a streak that lasted from November 2003 to August 2004. The rapid pace of expansion and rising backlog of orders indicates continued production and demand for manufacturing and logistics-related real estate in 2018
Inland Empire CA 517,858,172 19,402,682 25,223,635
Jacksonville, FL 107,082,686 2,573,476 814,005
Kansas City, MO 215,287,073 7,275,990 5,403,324
Lakeland, FL 30,898,925 790,716 636,120
Las Vegas, NV 117,324,620 5,564,750 1,947,244
Long Island, NY 130,769,166 24,000 695,297
Los Angeles, CA 1,080,641,455 6,020,423 6,365,058
Louisville, KY 155,848,256 5,426,549 5,798,798
Memphis, TN 192,588,615 2,641,192 5,261,192
Miami, FL 157,981,410 3,067,904 3,172,892
Milwaukee, WI 198,105,182 1,287,067 906,316
Minneapolis, MN 108,663,837 3,092,587 1,627,979
MarketBeat U.S. Q4 2017 cushmanwakefield.com | 10
Inventory
Inventory Inventory Deliveries 2017 Under Construction as of Q4 2017p
Nashville, TN 207,995,787 4,805,642 3,996,135
New Haven, CT 48,292,201 80,000 935,500
New Jersey - Central 341,321,388 7,785,164 8,757,684
New Jersey - Northern 287,598,708 2,005,865 2,147,654
Northern VA 57,131,862 80,160 557,144
Oakland/East Bay, CA 205,185,318 1,240,589 3,470,319
Oklahoma City, OK 71,065,215 536,200 735,000
Omaha, NE 69,083,789 1,407,829 976,862
Orange County, CA 283,793,824 274,185 1,520,658
Orlando, FL 118,245,488 3,032,432 1,096,983
Palm Beach County, FL 41,495,816 415,289 166,392
PA I-81/I-78 Distribution Corridor 263,583,781 11,615,118 18,884,195
Philadelphia, PA 296,281,456 3,233,678 3,604,829
Phoenix, AZ 310,643,801 5,828,136 5,170,358
Pittsburgh, PA 168,316,886 1,358,346 308,769
Portland, OR 197,493,348 2,692,461 3,655,414
Providence, RI 77,727,305 0 0
Puget Sound - Eastside 60,672,519 489,397 157,363
Raleigh/Durham, NC 52,082,803 460,500 136,500
Richmond, VA 94,625,913 770,333 215,447
Roanoke, VA 50,476,603 100,000 250,000
Rochester, NY 73,551,473 0 50,000
Sacramento, CA 140,875,778 1,298,734 787,605
Salt Lake City, UT 127,853,135 2,577,709 3,740,923
San Antonio, TX 39,577,534 1,328,065 827,217
San Diego, CA 162,974,353 586,434 3,125,499
San Francisco North Bay, CA 22,488,843 125,020 0
San Francisco Peninsula, CA 41,891,409 0 0
San Jose (Silicon Valley), CA 85,166,687 182,000 450,610
Savannah, GA 55,642,703 5,435,719 3,388,742
Seattle, WA 145,579,922 2,914,604 3,974,538
Southern New Hampshire 47,297,525 122,849 1,000,000
St. Louis, MO 242,661,549 4,648,798 3,838,945
St. Petersburg/Clearwater, FL 47,882,791 659,976 0
Suburban MD 48,638,129 216,000 182,834
Syracuse, NY 42,719,468 400,620 179,605
Tampa, FL 79,913,395 1,490,924 478,220
Tucson, AZ 42,753,403 169,971 230,134
Tulsa, OK 60,327,675 147,000 314,000
p = preliminary
Methodology
Cushman & Wakefield’s quarterly estimates are derived from a variety of data sources, including its own proprietary database, and historical data from third party data sources. The market statistics are calculated from a base building inventory made up of industrial properties deemed to be competitive in the local industrial markets. Generally, owner-occupied and federally-owned buildings are not included. Older buildings unfit for occupancy or ones that require substantial renovation before tenancy are generally not included in the competitive inventory. The inventory is subject to revisions due to resampling. Vacant space is defined as space that is available immediately or imminently after the end of the quarter. Sublet space still occupied by the tenant is not counted as available space. The figures provided for the current quarter are preliminary, and all information contained in the report is subject to correction of errors and revisions based on additional data received.
Regional Map
WestMidwestSouthNortheast
Jason Tolliver Head of Logistics &Industrial Research Americas Tel: +1 317.639.0549 cushmanwakefield.com
Explanation of Terms
Total Inventory: The total amount of industrial space (in buildings of a
predetermined size by market) that can be rented by a third party.
Overall Vacancy Rate: The amount of unoccupied space (new, relet, and
sublet) expressed as a percentage of total inventory.
Absorption: The net change in occupied space between two points in time.
(Total occupied space in the present quarter minus total occupied space from
the previous quarter, quoted on a net, not gross, basis.)
Leasing Activity: The sum of all leases over a period of time. This includes
pre-leasing activity as well as expansions. It does not include renewals.
Overall Weighted Asking Rents: NNN average asking rents weighted by the
amount of available direct and sublease space in industrial properties.
W/D: Warehouse and or distribution properties.
MFG: Manufacturing properties.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm with 45,000 employees in more than 70 countries helping occupiers and investors optimize the value of their real estate. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
Cushman & Wakefield Copyright 2018. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by the property owner(s). As applicable, we make no representation as to the condition of the property (or properties) in question.
Strong Occupier Demand Surmounts Wave of Historic Supply
Another Solid Year for Industrial: 175.1 million square feet (msf) of new deliveries have hit the market through the first three quarters of 2017, the largest wave of new space delivered in the first nine months of any year. Even so, industrial tenants have absorbed 187.4 msf of space, pushing the vacancy rate downward by 40 basis points (bps) year-over-year to a historic low of 5.1%. Average industrial asking rents for all product types have risen by 4.1% year-over-year to a new high of $5.80 per square foot (psf). Every industrial segment remains in growth mode with warehousing posting 167.2 msf of net absorption, manufacturing registering 11.3 msf of growth, and flex product experiencing 4.8 msf of net occupancy gains from January through September of this year.
Bigger the Market, Bigger the Leasing and Development: The U.S. industrial market remains on track to eclipse 230 msf of absorption for a fourth consecutive year. Considering that the annual average since 2010 has been 196.8 msf, 2017 will undoubtedly be another solid year. Over one-third of year-to-date absorption is attributable to five core markets: Dallas/Ft. Worth, Atlanta, Inland Empire, Chicago, and the Pennsylvania I-81/I-78 Distribution Corridor—an indication that, despite widespread occupancy gains, the bulk of activity remains concentrated in primary industrial cities. This is also the case with industrial development, as these same five markets account for over one-third of both year-to-date deliveries and product currently under construction.
Strong Fundamentals in Secondary Markets: Strengthening fundamentals in secondary markets have given rise to solid occupancy growth in Kansas City, Greenville, Baltimore, Phoenix, and Cincinnati, among other markets. Over 30 secondary markets have registered more than 1 msf of net absorption through Q3 2017. Notably, average annual rent growth for warehouse space is forecast to be stronger in secondary markets (5.5%) than in primary ones (4.8%) in 2017, although rent growth will be historically strong in both.
Supply Not Overpowering Demand: The construction pipeline is at its highest level this cycle. Despite the increase, supply and demand remain in relative equilibrium in most markets. Speculative projects account for 121.6 msf (or 69.5%) of year-to-date deliveries, and given the tight market, developers continue to break ground. Currently, there is 233.1 msf under construction, of which 150.9 msf is speculative. The greatest concentration of speculative projects is in the South and West regions (52.4 msf and 50.8 msf, respectively). Nationally, 34 markets have over 1 msf of speculative product in the pipeline, but in over half of them, vacancy rates continue to tighten, indicating a need for new supply.
Rents Continue to Run: Strong leasing activity by both traditional industrial users and eCommerce-related occupiers continues to fuel rent growth. U.S. average annual industrial warehouse asking rents have increased 23.7% since 2010, and in Q3 2017 rose 4.5% year-over-year to $5.10 psf. Among the regions, year-over-year rent growth in Q3 2017 was strongest in the West (8.4%), followed by the Midwest (5.0%) and the South (4.9%). Rents in the Northeast were virtually unchanged (0.2%). Asking rents increased quarter-over-quarter in 48 of the 79 markets tracked by Cushman & Wakefield, with the most notable increases occurring in coastal markets where a lack of available space and fierce competition are pushing rents higher.
Source: Cushman & Wakefield Research
Source: BLS
cushmanwakefield.com | 2
U.S. IndustrialQ3 2017
MARKETBEAT
Solid Demand in Primary and Secondary Markets YEAR-TO-DATE NET ABSORPTION (MSF)
Few Signs of Overbuilding YEAR-TO-DATE DELIVERIES BY TYPE: (MSF), VACANCY (YOY CHG, BPS)
New Demand Reflects eCommerce Dominance/Rise Q1 2008 = 100
Outlook• Logistics-related leasing will continue to benefit from solid
economic fundamentals that spur increased consumer spending.
• Net absorption will eclipse 230 msf for a fourth year in a row, and will reach 218 msf in 2018.
• Increased speculative supply will place upward pressure on vacancy as supply/demand begin to slowly rebalance in Q4 2017. We forecast average annual vacancy to rise 30 bps in 2018 to 5.3% for all industrial product types.
• Look for continued rental rate appreciation in Q4 2017, with rent growth slowly beginning to decelerate in 2018. We anticipate average annual rent gains of 3.7% in 2017, and 2.9% in 2018, for all industrial product types.
Source: U.S. Census Bureau, Cushman & Wakefield Research
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
U.S. Economy Powers Through Headwinds
Continued Growth on Horizon: The expansion is sailing forward despite economic uncertainty spurred by multiple hurricanes this season. Although weather snapped the 83-month streak of consecutive job gains, with firms shedding 33,000 nonfarm payrolls in September, it is important not to read too much into a single monthly report. We expect hiring to bounce back. On another positive note, the Institute for Supply Management’s (ISM) Purchasing Managers’ Index—a measure of the manufacturing sector’s health—rose to 60.8 in September, its highest reading since 2004. Seventeen of the 18 manufacturing industries the ISM tracks reported growth while the new orders component rose to a multi-year high (64.6). Those results suggest that the manufacturing sector will continue to churn out goods and drive related logistics demand in the months ahead.
Bustling Ports and Busy Railroads: Other important indicators that correlate well with the industrial sector, such as containerized retail imports, intermodal rail volume, and consumer spending, also continue to trend in a positive direction. Ports are bustling. In August 2017 (the most recent month for which data is available), U.S. retail container ports collectively handled 1.80 million TEUs—the highest monthly containerized import volume on record—surpassing the previous high of 1.78 million TEUs set one month earlier in July. This places Q3 2017 among the strongest quarters ever for containerized retail import activity. Railroads are also setting records. Average weekly intermodal rail volume in September was the second highest ever (behind 2015), with the last two weeks of that month the strongest in the history of U.S. railroads.
Confident Consumers Bode Well for Logistics: Consumer sentiment and spending also bode well for logistics and industrial demand. We anticipate consumer spending to grow by 2.7% in 2017, the same rate as last year, a pace that has translated into strong eCommerce-driven leasing fundamentals. Since the second quarter of 2016, eCommerce sales are up by more than 16%, the highest rate in five years. Retail sales are expected to pick up as we head into a holiday season that could be the best one in years. We anticipate overall retail sales will grow by 3.8% in 2017, compared to 3.0% in 2016, before accelerating to 4.1% in 2018.
02468
1012141618
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000 eCommerce Sales Index (RHS)Cumulative Retail Space Demand IndexCumulative Industrial Space Demand Index
Inland Empire CA 512,107,885 13,871,766 28,694,557
Jacksonville, FL 105,540,696 1,033,000 2,185,476
Kansas City, MO 212,730,704 4,688,819 7,185,944
Lakeland, FL 30,906,725 798,516 605,920
Las Vegas, NV 121,600,121 5,400,269 2,816,463
Long Island, NY 130,673,678 24,000 695,297
Los Angeles, CA 1,078,875,024 3,571,366 7,947,993
Louisville, KY 155,050,668 4,628,961 6,323,715
Memphis, TN 192,588,615 2,641,192 4,645,752
Miami, FL 157,928,023 2,747,294 2,762,058
Milwaukee, WI 197,826,440 886,330 1,362,845
Minneapolis, MN 106,052,379 825,015 2,443,423
MarketBeat U.S. Q3 2017 cushmanwakefield.com | 10
Inventory
Inventory Inventory Deliveries YTD 2017 Under Construction as of Q3 2017p
Nashville, TN 205,752,356 4,032,602 4,220,675
New Haven, CT 48,292,201 80,000 0
New Jersey - Central 340,589,581 6,319,357 7,379,818
New Jersey - Northern 286,312,012 657,361 2,256,037
Northern VA 57,131,862 80,160 557,144
Oakland/East Bay, CA 205,014,843 974,185 1,502,582
Oklahoma City, OK 71,065,215 536,200 735,000
Omaha, NE 68,888,299 1,100,736 1,020,955
Orange County, CA 283,736,914 274,185 1,520,658
Orlando, FL 117,336,971 2,131,843 1,836,336
Palm Beach County, FL 41,453,954 415,289 166,392
PA I-81/I-78 Distribution Corridor 262,530,994 10,835,118 14,311,346
Philadelphia, PA 295,816,523 2,661,198 2,469,432
Phoenix, AZ 309,392,931 4,364,574 1,992,949
Pittsburgh, PA 168,147,736 1,189,196 281,150
Portland, OR 196,092,237 2,067,328 2,418,650
Providence, RI 77,727,305 0 n/a
Puget Sound - Eastside 61,482,797 425,447 229,677
Raleigh/Durham, NC 52,208,150 460,500 768,000
Richmond, VA 94,257,888 397,600 726,046
Roanoke, VA 50,333,435 100,000 250,000
Rochester, NY 73,551,473 0 50,000
Sacramento, CA 140,600,555 1,348,678 748,179
Salt Lake City, UT 127,293,336 2,017,910 4,164,423
San Antonio, TX 40,211,544 920,814 1,178,398
San Diego, CA 162,910,024 497,434 2,352,167
San Francisco North Bay, CA 22,086,925 125,020 0
San Francisco Peninsula, CA 41,931,381 0 0
San Jose (Silicon Valley), CA 85,112,391 182,000 450,610
Savannah, GA 51,503,655 1,043,671 5,092,142
Seattle, WA 145,536,940 2,871,622 3,285,991
Southern New Hampshire 46,790,937 122,849 1,000,000
St. Louis, MO 242,658,440 4,100,420 2,750,718
St. Petersburg/Clearwater, FL 47,561,160 341,976 286,000
Suburban MD 48,594,729 216,000 136,666
Syracuse, NY 42,565,881 36,620 364,000
Tampa, FL 79,130,950 724,572 903,852
Tucson, AZ 42,719,570 169,971 230,134
Tulsa, OK 60,327,675 147,000 314,000
p = preliminary
Methodology
Cushman & Wakefield’s quarterly estimates are derived from a variety of data sources, including its own proprietary database, and historical data from third party data sources. The market statistics are calculated from a base building inventory made up of industrial properties deemed to be competitive in the local industrial markets. Generally, owner-occupied and federally-owned buildings are not included. Older buildings unfit for occupancy or ones that require substantial renovation before tenancy are generally not included in the competitive inventory. The inventory is subject to revisions due to resampling. Vacant space is defined as space that is available immediately or imminently after the end of the quarter. Sublet space still occupied by the tenant is not counted as available space. The figures provided for the current quarter are preliminary, and all information contained in the report is subject to correction of errors and revisions based on additional data received.
Regional Map
WestMidwestSouthNortheast
Jason Tolliver Head of Industrial Research, Americas Tel: +1 317.639.0549 cushmanwakefield.com
Explanation of Terms
Total Inventory: The total amount of industrial space (in buildings of a
predetermined size by market) that can be rented by a third party.
Overall Vacancy Rate: The amount of unoccupied space (new, relet, and
sublet) expressed as a percentage of total inventory.
Absorption: The net change in occupied space between two points in time.
(Total occupied space in the present quarter minus total occupied space from
the previous quarter, quoted on a net, not gross, basis.)
Leasing Activity: The sum of all leases over a period of time. This includes
pre-leasing activity as well as expansions. It does not include renewals.
Overall Weighted Asking Rents: NNN average asking rents weighted by the
amount of available direct and sublease space in industrial properties.
W/D: Warehouse and or distribution properties.
MFG: Manufacturing properties.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. 2017 marks the 100-year anniversary of the Cushman & Wakefield brand. 100 years of taking our clients’ ideas and putting them into action. To learn more, visit www.cushwakecentennial.com, www.cushmanwakefield.com or follow @CushWake on Twitter.
Cushman & Wakefield Copyright 2017. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by the property owner(s). As applicable, we make no representation as to the condition of the property (or properties) in question.
Carolyn Salzer Industrial Research Analyst, Americas Tel: +1 847.518.3212 cushmanwakefield.com
cushmanwakefield.com | 1
U.S. IndustrialQ2 2017
MARKETBEAT
U.S. INDUSTRIAL
Overall Vacancy
Net Absorption/Rent NNN 4-QTR TRAILING AVERAGE
Market IndicatorsQ2 16 Q2 17 12-Month
Forecast
Overall Vacancy 6.1% 5.3%
Net Absorption 77.3M 59.5M
Under Construction 193.7M 237.1M
Weighted Asking Rent (NNN) $5.38 $5.62
Employment IndicatorsQ2 16 Q2 17 12-Month
Forecast
Total Nonfarm Employment 143.9M 146.2M
Industrial Employment 25.2M 25.6M
Unemployment 4.9% 4.4%
$4.00
$4.50
$5.00
$5.50
$6.00
0
10
20
30
40
50
60
70
80
2012 2013 2014 2015 2016 2017
Net Absorption, MSF Weighted Asking Rent, $ PSF
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2012 2013 2014 2015 2016 2017
Historical Average = 8.3%
EconomyRecent economic indicators point to a U.S. economic expansion that still has legs. With 222,000 net new nonfarm payroll jobs added in June, job growth remains solid. In the first half of 2017, 1.1 million new jobs were created, indicating that the U.S. economy is still a job-creating machine. In fact, the economy has added jobs every month since October 2010—a record 81-month stretch that has absorbed roughly 16 million workers. That has spurred demand for industrial space, which has registered 1.5 billion square feet (bsf) of net absorption during that period.
The manufacturing sector also remains on a roll. The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) rose to 57.8 in June, its highest level since August 2014. The index has been in expansionary territory for ten consecutive months. The new orders component of the PMI—a gauge of manufacturing’s health in the months ahead—rose to 63.5 in June, bringing it close to the multi-year high of 65.1 reached at the beginning of 2017.
U.S. rail traffic in Q2 2017 was a mix of great and mediocre. On the “great” side were year-to-date intermodal volumes through June that were the largest on record. The “mediocre” side saw motor vehicles and parts shipments post their sixth straight monthly decline. But while new light vehicle sales are down from 2016’s record pace, there is no reason to panic. Auto sales are higher in the first half of 2017 than in any comparable period since 2005.
The Conference Board’s Consumer Confidence Index ticked upward to 118.9 in June. Through the first half of 2017, the average index was 118.2. The last time the measure remained that high over a six-month period was late 2000. Despite an unexpected decline in retail sales in May (-0.3%), core retail sales—which correspond most closely with the consumer spending portion of GDP—were unchanged in May (0.6%), and online sales increased by 0.8% in May after rising 0.9% in April. Given the solid labor market, a promising manufacturing outlook, strong transportation indices, high consumer confidence and rising wages, expect to see the industrial run continue.
Market OverviewThe U.S. industrial market absorbed 59.5 million square feet (msf) of space in the second quarter of 2017, up 6.6% from that registered in the previous quarter, propelling year-to-date net absorption to 115.3 msf. Every industrial segment remains in growth mode: through mid-year, warehouse and distribution space posted 101.6 msf of net absorption, manufacturing registered 8.3 msf, and flex product experienced 5.4 msf of net occupancy gains.
Occupier demand for modern logistics space continues to be hot, with leasing of newly constructed speculative and build-to-suit product delivered in the past 24 months accounting for 62.3% of Q2 2017 net absorption. Although 19 markets report over 1 msf of positive net absorption during the second quarter, Chicago (6.9 msf), Atlanta (6.3 msf), Dallas/Ft. Worth (5.7
Source: Cushman & Wakefield Research
Source: BLS
cushmanwakefield.com | 2
U.S. IndustrialQ2 2017
MARKETBEAT
Speculative Construction Is on the Rise SPEC DELIVERIES ARE RISING BUT REMAIN WELL BELOW PRIOR CYCLES
On Pace for Another Strong Year DEMAND CONTINUES TO KEEP PACE WITH SUPPLY
Many Markets Remain as Tight as a Drum CURRENT VACANCY VS. PRIOR CYCLE TROUGH
Outlook• Logistics-related leasing will benefit from solid economic
fundamentals that spur increased consumer spending.
• Net absorption will eclipse 225 msf for a fourth year in a row.
• Deliveries will not overpower demand, but increased speculative supply will place upward pressure on vacancy.
• Expect continued rental rate appreciation in the second half of 2017 with rent growth decelerating in 2018.
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
msf), the Pennsylvania I-81/I-78 Distribution Corridor (4.6 msf), the Inland Empire (3.6 msf) and Central New Jersey (2.5 msf) account for nearly half of the nation’s net absorption.
Demand has exceeded supply has exceeded supply for 29 quarters. That has resulted in historic lows for vacancy, and a challenging operating environment for industrial occupiers seeking to expand their supply chain networks. The national industrial vacancy rate tightened further in Q2 2017, as vacancy fell 20 basis points (bps) to 5.3%, a full 300 bps below the 10-year historical average. Vacancy declined or held firm in 37 of the 79 markets tracked by Cushman & Wakefield, and rates remain below their 10-year historical average in all 79 markets.
On the development front, 107.2 msf has been delivered so far in 2017, with 52.5 msf of that total coming online in the second quarter. Over two-thirds of the deliveries this year have been speculative, but preleasing of speculative product remains brisk. In Q2 2017, preleasing rates for newly delivered product rose 340 bps from the first quarter to 48.9%, a clear indication of strong demand for functional product. The construction pipeline expanded noticeably in the second quarter, increasing by 8.1% from Q1 2017 to 237.1 msf. While the greatest concentration of construction is in large markets with strong underlying fundamentals and low vacancies, construction starts increased in 46 of 79 markets.
Given the tight conditions and strong leasing by eCommerce and 3PL occupiers, industrial asking rents have continued to rise. U.S. industrial asking rents for all product types increased 4.6% in Q2 2017 from a year ago to $5.62 per square foot (psf). Average U.S. industrial rents rose in 61 of 79 markets during the same time, with over one-quarter of the industrial markets reporting double-digit gains. Meanwhile, average U.S. warehouse rents for all classes increased 4.3% in Q2 2017 from a year ago to $5.05 psf—the highest mark since Cushman & Wakefield began tracking the metric in 1990.
Inventory Inventory Deliveries YTD 2017 Under Construction as of Q2 2017p
Nashville, TN 204,479,749 2,020,132 4,448,300
New Haven, CT 47,798,552 30,000 130,500
New Jersey - Central 338,995,144 4,751,804 5,846,034
New Jersey - Northern 285,876,477 441,600 1,716,735
Northern VA 57,051,702 0 399,485
Oakland/East Bay, CA 204,831,460 161,483 1,499,605
Oklahoma City, OK 70,590,005 345,000 926,200
Omaha, NE 68,235,589 579,256 1,012,695
Orange County, CA 283,176,958 274,185 585,904
Orlando, FL 117,043,071 1,843,183 1,209,615
Palm Beach County, FL 40,517,552 361,690 296,860
PA I-81/I-78 Distribution Corridor 259,997,039 7,588,663 12,438,409
Philadelphia, PA 294,311,006 1,298,650 3,039,169
Phoenix, AZ 307,138,523 2,211,399 3,991,235
Pittsburgh, PA 167,747,744 789,204 395,570
Portland, OR 195,050,921 1,068,870 2,302,100
Providence, RI 77,727,305 n/a n/a
Puget Sound - Eastside 61,325,797 268,447 386,677
Raleigh/Durham, NC 51,378,896 184,500 871,914
Richmond, VA 95,679,695 397,600 474,333
Roanoke, VA 50,093,282 100,000 250,000
Rochester, NY 73,551,473 0 50,000
Sacramento, CA 141,000,710 443,734 1,212,223
Salt Lake City, UT 125,875,624 600,198 3,117,647
San Antonio, TX 39,305,488 593,726 1,061,068
San Diego, CA 162,738,462 178,336 1,168,757
San Francisco North Bay, CA 21,960,430 125,020 0
San Francisco Peninsula, CA 41,954,253 0 0
San Jose (Silicon Valley), CA 85,154,559 182,000 450,610
Savannah, GA 51,503,655 1,043,671 5,092,142
Seattle, WA 144,096,189 1,433,172 2,647,821
Southern New Hampshire 46,774,564 0 1,404,873
St. Louis, MO 240,081,119 1,735,400 3,583,398
St. Petersburg/Clearwater, FL 47,606,481 291,976 242,000
Suburban MD 48,594,729 216,000 136,666
Syracuse, NY 42,742,531 36,620 104,000
Tampa, FL 78,861,533 387,126 1,241,498
Tucson, AZ 42,742,639 140,160 29,811
Tulsa, OK 60,222,675 42,000 105,000
p = preliminary
Methodology
Cushman & Wakefield’s quarterly estimates are derived from a variety of data sources, including its own proprietary database, and historical data from third party data sources. The market statistics are calculated from a base building inventory made up of industrial properties deemed to be competitive in the local industrial markets. Generally, owner-occupied and federally-owned buildings are not included. Older buildings unfit for occupancy or ones that require substantial renovation before tenancy are generally not included in the competitive inventory. The inventory is subject to revisions due to resampling. Vacant space is defined as space that is available immediately or imminently after the end of the quarter. Sublet space still occupied by the tenant is not counted as available space. The figures provided for the current quarter are preliminary, and all information contained in the report is subject to correction of errors and revisions based on additional data received.
Regional Map
WestMidwestSouthNortheast
Jason Tolliver Head of Industrial Research, Americas Tel: +1 317.639.0549 cushmanwakefield.com
Explanation of Terms
Total Inventory: The total amount of industrial space (in buildings of a
predetermined size by market) that can be rented by a third party.
Overall Vacancy Rate: The amount of unoccupied space (new, relet, and
sublet) expressed as a percentage of total inventory.
Absorption: The net change in occupied space between two points in time.
(Total occupied space in the present quarter minus total occupied space from
the previous quarter, quoted on a net, not gross, basis.)
Leasing Activity: The sum of all leases over a period of time. This includes
pre-leasing activity as well as expansions. It does not include renewals.
Overall Weighted Asking Rents: NNN average asking rents weighted by the
amount of available direct and sublease space in industrial properties.
W/D: Warehouse and or distribution properties.
MFG: Manufacturing properties.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. 2017 marks the 100-year anniversary of the Cushman & Wakefield brand. 100 years of taking our clients’ ideas and putting them into action. To learn more, visit www.cushwakecentennial.com, www.cushmanwakefield.com or follow @CushWake on Twitter.
Cushman & Wakefield Copyright 2017. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by the property owner(s). As applicable, we make no representation as to the condition of the property (or properties) in question.
Carolyn Salzer Industrial Research Analyst, Americas Tel: +1 847.518.3212 cushmanwakefield.com
cushmanwakefi eld.com | 1
U.S. IndustrialQ1 2017
MARKETBEAT
U.S. INDUSTRIAL
Overall Vacancy
Net Absorption/Rent NNN4-QTR TRAILING AVERAGE
Market IndicatorsQ1 16 Q1 17 12-Month
Forecast
Overall Vacancy 6.1% 5.3%
Net Absorption 62.8M 53.8M
Under Construction 175.6M 219.3M
Weighted Asking Rent (NNN) $5.44 $5.67
Employment IndicatorsQ1 16 Q1 17 12-Month
Forecast
Total Nonfarm Employment 143.4M 145.7M
Industrial Employment 25.3M 25.6M
Unemployment 4.9% 4.6%
$4.00
$4.50
$5.00
$5.50
$6.00
0
10
20
30
40
50
60
70
80
2012 2013 2014 2015 2016 2017
Net Absorption, MSF Weighted Asking Rent, $ PSF
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2012 2013 2014 2015 2016 2017
Historical Average = 8.3%
EconomyEmployment growth in the fi rst quarter of 2017 was solid — averaging 178,000 jobs per month and thus a sizeable increase from the monthly average of 148,000 jobs added in the fourth quarter of 2016. Q1 2017 job growth was roughly on par with the average of 187,000 per month for 2016 as a whole. The March job gains of 98,000, while comparatively small, continued the record-setting streak of employment growth that began in the fourth quarter of 2010.
The manufacturing sector is on a roll. The Institute for Supply Management’s (ISM) Purchasing Managers’ Index has been in expansionary territory for seven straight months, registering 57.2 in March. That indicates conditions within the sector are much improved. The subcomponents of the ISM index painted an even stronger picture, showing new orders expanding vigorously, exports at their highest point since 2013, and employment at levels not seen since 2011. Improvement is also evident in an uptick in rail volumes. The American Association of Railroads reports that year-to-date total carloads through March totaled 180,655 — up 5.7% from a year-ago, and year-to-date intermodal volume was up 1.4% (47,977 units) over last year.
However, U.S. retail sales fell for a second straight month in March. The U.S. Commerce Department reported that retail sales declined by 0.2%, led by a decline in auto sales which were down 1.6% from the same month a year prior. Sales of cars and light trucks declined to a 16.5 million-unit pace, the slowest in more than two years, and is evidence that the auto market has cooled somewhat after an unprecedented seventh straight year of record sales. In contrast, eCommerce sales continued to grow, with online sales up 11.9% from a year ago.
The Conference Board’s Consumer Confi dence Index surged in March to 125.6 — its highest level in more than 16 years— amid growing market optimism. This reading suggests that consumer spending will accelerate. With confi dence upbeat and household balance sheets healthy, real consumption should fi rm moving forward, serving as a catalyst for industrial-related leasing.
Market OverviewThe U.S. industrial market absorbed 53.8 million square feet (MSF) of space in the fi rst quarter of 2017, a 14.4% decline from that registered in the fi rst quarter 2016. Still, Q1 2017 absorption was well above the quarterly average of 49.3 MSF of absorption witnessed during the current economic recovery and signifi cantly higher than the average quarterly absorption of 40.6 MSF registered during the last two economic growth cycles. Q1 2017 marks 28 quarters of net occupancy gains, placing the current expansion among the longest on record. The current expansion is also among the strongest with net absorption now having surpassing 1.3 billion square feet added since 2010.
The current booming industrial expansion has been more broad-based than prior expansions, and widespread occupancy gains continue across the country. Nineteen
Near-Term Industrial OutlookEXPECT ANOTHER STRONG PERFORMANCE FOR THE INDUSTRIAL MARKET
Will Confi dent Consumers Increase Spending?GROWING OPTIMISM SUGGESTS CONSUMER SPENDING WILL ACCELERATE
Outlook• Logistics-related leasing will benefi t from solid economic
fundamentals that spur increased consumer spending.
• Trade policy of the Trump Administration remains unclear, but it appears that the most likely policy adjustments will not roil supply chains.
• Deliveries are not expected to overpower leasing demand. However, supply will meet demand and slowly bring fundamentals back into balance.
• Expect continued rental rate appreciation in Q2 2017 with rent growth decelerating in the second half of 2017.
Source: The Conference Board, U.S. Department of Commerce
Source: U.S. Department of Transportation, Cushman & Wakefi eld Research
Source: Cushman & Wakefi eld Research
markets reported over 1 MSF of positive net absorption during the fi rst quarter of the year. Occupier demand for modern industrial space continues to grow, with new construction leasing of speculative and build-to-suit industrial product delivered in the past 24 months accounting for over half of Q1 2017 net absorption.
The national industrial vacancy rate continued to decline in the fi rst quarter of 2017 to 5.3%, falling 20 basis points (bps) from Q4 2016 and 80 bps from a year ago. Industrial vacancy is currently tracking at its lowest level of the past 30 years and is now a full 300 bps below the 10-year historical average of 8.3%. Vacancy rates declined or held fi rm during the quarter in 51 of the 79 markets tracked by Cushman & Wakefi eld. Strong leasing fundamentals have driven vacancies for each industrial product lower than at any point in the last cycle.
In Q1 2017, 54.9 MSF of new industrial product came online, of which 39.8 MSF was speculative. Sixteen markets delivered more than 1 MSF in Q1 2017, led by Dallas/Ft. Worth (7.1 MSF), Atlanta (6.3 MSF), Chicago (4.2 MSF), the Pennsylvania I-81/I-78 Distribution Corridor (3.2 MSF), Kansas City (2.6 MSF), Central New Jersey (2.1 MSF) and the Inland Empire (2.1 MSF). The pipeline remains robust, with ground breakings up 24% since the fourth quarter of 2016. Currently, speculative projects under construction total 145.5 MSF, which accounts for 66.3% of the total 219.3 MSF in the development pipeline. We anticipate that supply will meet demand in Q2 2017, and that vacancy will slowly begin to rebalance in the second half of 2017.
An uptick in leasing by third-party logistics services (3PLs) and healthy demand from other logistics and distribution occupiers are fueling rent growth. U.S. industrial asking rents rose 4.2% in Q1 2017 from a year ago. Industrial rents rose in 71 of the 79 markets tracked during the same period, with over one-third of industrial markets reporting double-digit gains. In many markets, industrial rents remain at historic highs, and on a national level every industrial product type is experiencing rental rate appreciation.
MarketBeat U.S. Q1 2017 cushmanwakefi eld.com | 10
Inventory
Inventory Inventory Deliveries YTD 2017 Under Construction as of Q1 2017p
New Haven, CT 47,863,075 0 135,000
New Jersey - Central 336,272,961 2,140,071 7,712,329
New Jersey - Northern 285,778,100 441,600 1,687,735
Northern VA 56,855,867 0 399,485
Oakland/East Bay, CA 204,476,525 0 1,473,974
Oklahoma City, OK 68,912,893 100,000 1,171,200
Omaha, NE 68,199,188 206,356 1,098,673
Orange County, CA 282,749,006 41,666 232,519
Orlando, FL 115,574,173 249,200 1,556,803
Palm Beach County, FL 40,459,236 0 736,931
PA I-81/I-78 Distribution Corridor 255,644,154 3,235,778 11,382,636
Philadelphia, PA 293,168,918 692,530 2,773,908
Phoenix, AZ 306,953,913 1,630,513 4,021,593
Pittsburgh, PA 167,555,119 596,579 470,150
Portland, OR 194,685,062 431,246 2,818,387
Providence, RI 77,727,305 0 0
Puget Sound - Eastside 61,257,350 200,000 411,052
Raleigh/Durham, NC 51,660,957 184,500 571,414
Richmond, VA 93,503,433 60,000 711,933
Roanoke, VA 49,995,771 0 0
Rochester, NY 73,551,473 0 50,000
Sacramento, CA 141,114,298 423,734 1,073,255
Salt Lake City, UT 125,731,188 438,852 2,722,906
San Antonio, TX 39,331,519 303,200 897,747
San Diego, CA 162,842,066 178,336 907,734
San Francisco North Bay, CA 21,876,795 29,776 0
San Francisco Peninsula, CA 41,513,281 0 0
San Jose (Silicon Valley), CA 85,415,359 182,000 450,610
Savannah, GA 50,459,984 0 5,000,913
Seattle, WA 143,580,512 924,329 2,217,116
Southern New Hampshire 46,890,390 0 1,033,873
St. Louis, MO 240,380,052 1,735,400 2,835,398
St. Petersburg/Clearwater, FL 47,168,185 236,976 105,000
Stockton/Tracy, CA 114,169,641 381,600 2,341,449
Suburban MD 48,352,584 0 311,000
Syracuse, NY 42,767,773 0 142,000
Tampa, FL 78,435,558 196,324 1,178,800
Tucson, AZ 42,711,884 120,000 49,971
Tulsa, OK 60,222,675 42,000 0
p = preliminary
Methodology
Cushman & Wakefi eld’s quarterly estimates are derived from a variety of data sources, including its own proprietary database, and historical data from third party data sources. The market statistics are calculated from a base building inventory made up of industrial properties deemed to be competitive in the local industrial markets. Generally, owner-occupied and federally-owned buildings are not included. Older buildings unfi t for occupancy or ones that require substantial renovation before tenancy are generally not included in the competitive inventory. The inventory is subject to revisions due to resampling. Vacant space is defi ned as space that is available immediately or imminently after the end of the quarter. Sublet space still occupied by the tenant is not counted as available space. The fi gures provided for the current quarter are preliminary, and all information contained in the report is subject to correction of errors and revisions based on additional data received.
Regional Map
WestMidwestSouthNortheast
Jason TolliverHead of Industrial Research, AmericasTel: +1 317.639.0549cushmanwakefi eld.com
Explanation of Terms
Total Inventory: The total amount of industrial space (in buildings of a
predetermined size by market) that can be rented by a third party.
Overall Vacancy Rate: The amount of unoccupied space (new, relet, and
sublet) expressed as a percentage of total inventory.
Absorption: The net change in occupied space between two points in time.
(Total occupied space in the present quarter minus total occupied space from
the previous quarter, quoted on a net, not gross, basis.)
Leasing Activity: The sum of all leases over a period of time. This includes
pre-leasing activity as well as expansions. It does not include renewals.
Overall Weighted Asking Rents: NNN average asking rents weighted by the
amount of available direct and sublease space in industrial properties.
W/D: Warehouse and or distribution properties.
MFG: Manufacturing properties.
About Cushman & Wakefi eld
Cushman & Wakefi eld is a leading global real estate services fi rm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefi eld is among the largest commercial real estate services fi rms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. 2017 marks the 100-year anniversary of the Cushman & Wakefi eld brand. 100 years of taking our clients’ ideas and putting them into action. To learn more, visit www.cushwakecentennial.com, www.cushmanwakefi eld.com or follow @CushWake on Twitter.
Cushman & Wakefi eld Copyright 2017. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by the property owner(s). As applicable, we make no representation as to the condition of the property (or properties) in question.
Carolyn SalzerIndustrial Research Analyst, AmericasTel: +1 847.518.3212cushmanwakefi eld.com
cushmanwakefi eld.com | 1
U.S. IndustrialQ4 2016
MARKETBEAT
U.S. INDUSTRIAL
Overall Vacancy
Net Absorption/Rent NNN4-QTR TRAILING AVERAGE
Market IndicatorsQ4 15 Q4 16 12-Month
Forecast
Overall Vacancy 6.5% 5.5%
Net Absorption 67.3M 63.6M
Under Construction 185.6M 215.6M
Weighted Asking Rent (NNN) $5.43 $5.64
Employment IndicatorsQ4 15 Q4 16 12-Month
Forecast
Total Nonfarm Employment 142.8M 144.6M
Industrial Employment 25.1M 25.2M
Unemployment 5.0% 4.7%
$4.50
$5.00
$5.50
$6.00
0
10
20
30
40
50
60
70
80
2011 2012 2013 2014 2015 2016
Net Absorption, MSF Weighted Asking Rent, $ PSF
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2011 2012 2013 2014 2015 2016
Historical Average = 8.4%
EconomyThe U.S. economy and industrial market are positioned to perform well in 2017. In the third quarter of 2016 real GDP expanded at a 3.5% annual rate — the strongest growth rate in two years and more than triple the rate of growth for the fi rst half of 2016. Nationally, 2.2 million jobs were created during 2016, and the unemployment rate (4.7% in December) declined to its lowest level since 2007. Wage growth is fi rming: hourly earnings rose 2.9% year-over-year in December — a post-recession high. The increase in wages will enable households to further increase consumption in 2017, sustaining economic momentum and bolstering logistics-related leasing. Economic data refl ect an increasingly confi dent consumer. The Conference Board’s Consumer Confi dence Index rose to 113.7 in December — its highest level this business cycle — with the expectation series of the index showing that consumers anticipate business conditions, jobs and their income to improve in the next six months. Given that consumer spending is a dominant driver of industrial demand these readings indicate more momentum for the industrial sector, especially as eCommerce continues to grow rapidly. As a share of retail sales, excluding autos, eCommerce has grown from 1% in Q1 2000 to 9.3% in Q3 2016. We expect that share to increase by another 1% by the end of 2018; that means the current rate of $100 billion eCommerce sales per quarter will increase roughly 25% to nearly $125 billion per quarter in Q4 2018 as retail sales increase. This equates to an additional $2 billion in eCommerce sales per month within the next two years. This growth trajectory suggests similar, if not more, robust absorption for warehouse and distribution product.
The U.S. manufacturing sector ended 2016 on a strong note: the ISM manufacturing index rose to a two-year high of 54.7 in December as production and new orders surged. The strength in production and new orders reported in the ISM index are consistent with other economic data including core capital goods orders and the manufacturing portion of industrial production, both of which indicate a stronger manufacturing sector. Domestic companies have also reined in inventories to more closely align with sales and there are early signs corporate investment is beginning to fi rm, both of which bode well for the industrial market.
Market OverviewDemand remained robust in the fi nal quarter of 2016 as the U.S. industrial market absorbed 63.6 million square feet (MSF) of space. This propelled annual net absorption to a record-setting 282.9 MSF and pushed deliveries to a cyclical high of 232.9 MSF. Typically such a robust development pipeline would dramatically rebalance supply and demand fundamentals and elevate the vacancy rate, but these are not typical times. Ecommerce continues to structurally alter supply chains and drive robust levels of leasing. As a result, the vacancy rate tightened in Q4 2016 falling by 30 basis points (bps) to 5.5% for all industrial product types.
Every industrial segment remains in growth mode: in 2016, logistics-related warehousing posted 242.9 MSF of net absorption, manufacturing registered 25.1 MSF of growth, fl ex
Source: Cushman & Wakefi eld Research
Source: BLS
cushmanwakefi eld.com | 2
U.S. IndustrialQ4 2016
MARKETBEAT
Stronger Growth Expected in the Near Term ODDS ARE HIGH THAT FISCAL STIMULUS MEASURES YIELD GROWTH
Supply/Demand Remains ImbalancedSTRONG DEMAND AND SUPPLY CONSTRAINTS TIGHTEN VACANCY
Confi dent Consumers Will Spur SpendingWITH CONFIDENCE AT CYCLICAL HIGH EXPECT INCREASED CONSUMPTION
Outlook• Solid labor markets and fi rmer wage growth will support
consumer confi dence and spur stronger consumer spending. Consumption will drive industrial absorption, particularly for warehouse.
• Given the expected policy changes (tax cuts, spending increases, deregulation) from the Trump administration, the near-term outlook has been revised upward. The medium- and long-term outlook is less certain.
• Net absorption will once again approach 250 MSF in 2017. Leasing demand will balance new deliveries and hold national vacancy steady.
• We anticipate that supply will meet demand for industrial space in the latter half of 2017. Until then, expect strong pressure on rents to remain.
Source: The Conference Board, Cushman & Wakefi eld Research
Source: Bureau of Economic Analysis, Moody’s Analytics, Cushman & Wakefi eld Research
Source: Cushman & Wakefi eld Research
product posted 13.1 MSF of net occupancy gains, and high technology occupancy increased by 1.8 MSF. The current industrial expansion is one for the record book. As of January 2017, the industrial sector has registered 27 consecutive quarters of net occupancy gains, placing this expansion among the longest ever. It is also among the strongest with net absorption for the past three years (825.5 MSF) surpassing the strongest period of occupancy growth in the prior cycle (726.8 MSF from 1997-1999).
U.S. industrial vacancy (5.5%) is currently at its lowest level of the past 30 years and is a full 290 bps below the 10-year historical average of 8.4% for all product types. Warehouse conditions remain tight with vacancy holding steady at 5.6% in Q4 2016. Over the past year, logistics-related vacancy has declined 130 bps (from 6.9% to 5.6%) despite the delivery of 156.8 MSF of new speculative warehouse product. In most industrial markets, vacancy rates have fallen below prior-cycle lows.
Healthy demand from logistics and distribution users is fueling rent growth. U.S. industrial asking rents increased 3.9% in Q4 2016 from a year ago. Industrial rents rose in 61 of 79 markets tracked by Cushman & Wakefi eld during the same period, with over one-quarter of industrial markets reporting double-digit gains. In many markets, industrial rents remain at historic highs, and on a national level every industrial product type is witnessing rental rate appreciation.
Currently, there is 215.6 MSF of industrial product under construction, of which 145.9 MSF is speculative. Although development remains strongest in major industrial markets, port cities and primary inland distribution hubs, nearly half of the U.S. markets currently have over 1 MSF under construction. Given the tight market conditions and strong underlying fundamentals, developers are expected to break ground on additional speculative projects which will help bring supply and demand fundamentals closer to balance. Nonetheless, tenant activity in the market remains brisk and it is likely that leasing demand will keep pace with supply deliveries in the near term.
Inland Empire CA 498,534,650 20,530,668 22,748,712
Jacksonville, FL 104,660,284 879,777 1,531,201
Kansas City, MO 207,988,781 8,340,589 6,920,628
Lakeland, FL 32,604,567 405,060 1,396,036
Las Vegas, NV 107,582,601 2,613,021 3,650,700
Long Island, NY 130,131,077 178,000 637,745
Los Angeles, CA 1,078,341,579 3,454,220 5,810,424
Louisville, KY 142,224,553 6,009,765 5,494,466
Memphis, TN 190,647,503 4,375,473 2,641,192
Miami, FL 151,740,646 1,626,819 4,220,640
Milwaukee, WI 198,032,676 1,947,459 577,770
Minneapolis, MN 104,981,039 3,079,509 788,000
MarketBeat U.S. Q4 2016 cushmanwakefi eld.com | 10
Inventory
Inventory Inventory Deliveries 2016 Under Construction as of Q4 2016p
Nashville, TN 201,822,563 3,300,993 5,260,229
New Haven, CT 48,872,066 305,773 80,500
New Jersey - Central 334,939,373 3,641,888 9,123,334
New Jersey - Northern 289,024,393 526,248 2,129,335
Oklahoma City, OK 68,966,254 871,719 0
Omaha, NE 68,291,937 873,368 913,356
Orange County, CA 283,034,100 624,875 222,735
Orlando, FL 110,494,129 1,366,743 1,494,160
Palm Beach County, FL 40,820,146 594,672 736,931
PA I-81/I-78 Distribution Corridor 256,795,466 17,318,399 13,206,024
Philadelphia, PA 289,850,312 4,098,702 3,466,438
Phoenix, AZ 305,451,542 5,472,611 3,007,218
Pittsburgh, PA 168,108,301 1,559,023 229,650
Portland, OR 193,837,947 2,243,343 2,698,132
Providence, RI 77,727,305 0 0
Puget Sound - Eastside 61,057,350 298,378 655,124
Raleigh/Durham, NC 51,543,680 668,623 336,124
Richmond, VA 92,574,799 304,600 578,990
Roanoke, VA 49,847,096 0 250,000
Rochester, NY 73,551,473 0 0
Sacramento, CA 133,714,559 96,152 282,254
Salt Lake City, UT 125,295,336 1,749,201 2,770,669
San Antonio, TX 39,424,869 1,701,481 1,246,874
San Diego, CA 161,367,510 1,182,206 726,791
San Francisco North Bay, CA 21,847,019 179,354 125,020
San Francisco Peninsula, CA 40,659,616 0 0
San Jose (Silicon Valley), CA 84,601,590 674,803 0
Savannah, GA 50,459,984 3,197,810 5,000,913
Seattle, WA 141,618,321 2,666,232 3,037,177
Southern New Hampshire 48,001,232 0 n/a
St. Louis, MO 246,439,063 5,956,052 3,169,200
St. Petersburg/Clearwater, FL 51,403,077 0 341,976
Stockton/Tracy, CA 98,077,810 2,216,100 988,626
Suburban MD 48,410,804 1,246,170 311,000
Suburban VA 56,855,867 635,182 90,240
Syracuse, NY 42,680,937 386,500 142,000
Tampa, FL 80,044,666 28,500 702,672
Tucson, AZ 41,733,267 863,488 159,971
Tulsa, OK 60,180,675 292,500 40,250
p = preliminary
Methodology
Cushman & Wakefi eld’s quarterly estimates are derived from a variety of data sources, including its own proprietary database, and historical data from third party data sources. The market statistics are calculated from a base building inventory made up of industrial properties deemed to be competitive in the local industrial markets. Generally, owner-occupied and federally-owned buildings are not included. Older buildings unfi t for occupancy or ones that require substantial renovation before tenancy are generally not included in the competitive inventory. The inventory is subject to revisions due to resampling. Vacant space is defi ned as space that is available immediately or imminently after the end of the quarter. Sublet space still occupied by the tenant is not counted as available space. The fi gures provided for the current quarter are preliminary, and all information contained in the report is subject to correction of errors and revisions based on additional data received.
Regional Map
WestMidwestSouthNortheast
Jason TolliverHead of Industrial Research, AmericasTel: +1 317.634.6363cushmanwakefi eld.com
Explanation of Terms
Total Inventory: The total amount of industrial space (in buildings of a
predetermined size by market) that can be rented by a third party.
Overall Vacancy Rate: The amount of unoccupied space (new, relet, and
sublet) expressed as a percentage of total inventory.
Absorption: The net change in occupied space between two points in time.
(Total occupied space in the present quarter minus total occupied space from
the previous quarter, quoted on a net, not gross, basis.)
Leasing Activity: The sum of all leases over a period of time. This includes
pre-leasing activity as well as expansions. It does not include renewals.
Overall Weighted Asking Rents: NNN average asking rents weighted by the
amount of available direct and sublease space in industrial properties.
W/D: Warehouse and or distribution properties.
MFG: Manufacturing properties.
About Cushman & Wakefi eld
Cushman & Wakefi eld is a leading global real estate services fi rm that helps clients transform the way people work, shop, and live. Our 43,000 employees in more than 60 countries help investors and occupiers optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefi eld is among the largest commercial real estate services fi rms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefi eld.com or follow @CushWake on Twitter.
Cushman & Wakefi eld Copyright 2016. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by the property owner(s). As applicable, we make no representation as to the condition of the property (or properties) in question.
cushmanwakefield.com | 1
U.S. IndustrialQ3 2016
MARKETBEAT
U.S. INDUSTRIAL
Overall Vacancy
Net Absorption/Rent NNN 4-QTR TRAILING AVERAGE
Market IndicatorsQ3 15 Q3 16 12-Month
Forecast
Overall Vacancy 6.5% 5.6%
Net Absorption 58.0M 74.9M
Under Construction 182.3M 214.5M
Weighted Asking Rent (NNN) $5.30 $5.57
Employment IndicatorsQ3 15 Q3 16 12-Month
Forecast
Total Nonfarm Employment 142.2M 144.6M
Industrial Employment 24.8M 25.2M
Unemployment 5.2% 4.9%
EconomyDespite a series of shocks to the U.S. economy this year and uncertainties surrounding the U.S. presidential election, the fundamentals that drive demand for industrial space remain firmly intact. Important indicators that correlate well with the industrial sector, such as containerized traffic flows, transportation indices and consumer confidence, are still trending in a positive direction. The ever-important employment figures also point to ongoing industrial growth. The U.S. economy added a solid 575,00 jobs over the past three months ending in September, and wage growth is accelerating. The latest trends in the labor markets are consistent with stronger consumer spending as well as housing and construction improvements, all of which bode well for industrial-related leasing.
A bounce-back in the ISM manufacturing index in September should also help allay concerns that growth will stall in the fourth quarter of 2016. The manufacturing index returned to expansion territory, rising 2.1 points to 51.5 at the end of the third quarter. Aside from continued weakness in manufacturing employment, the sub-index readings were generally upbeat. Notably, the new orders component surged 6.0 points to 55.1, which provides some hope that business spending will improve in the fourth quarter. Order backlogs also jumped — another reason for optimism. It is also promising to see the production component move back into expansionary territory (52.8), with 10 of 18 industry sectors reporting growth in production.
Clearly the sector is confronting headwinds. Exporters continue to face a stronger U.S. dollar, global weakness persists, and firms continue to be challenged by elevated inventories which hamper freight movements by ocean, rail and trucking. For five consecutive quarters, elevated inventories have also been a drag on GDP growth. That is the longest stretch since 1957. The ISM customer inventories component climbed to 53.0 in September, its second highest reading of the current expansion. This indicates that inventories remain too high in some places along the supply chain, which will temporarily curb demand for industrial space in certain areas. But all these developments aren’t new challenges; indeed the industrial market has performed remarkably well despite them. Looking forward we still see the positives outweighing the negatives in the industrial market.
Market OverviewU.S. industrial markets absorbed 74.9 million square feet (MSF) of space in the third quarter of 2016, up 29.1% from the third quarter of 2015. This propelled year-to-date net absorption to 212.9 MSF, up 17.9% from the same period a year prior. The industrial sector has now registered 26 consecutive quarters of net occupancy gains. Although 18 markets witnessed over 1 MSF of absorption during Q3 2016, the bulk of leasing activity remained concentrated near port cities, inland distribution hubs, and population centers. Every industrial segment continued in growth mode during the quarter: through the nine months ending in September, logistics-related warehousing has posted 185.6 MSF of net absorption, manufacturing has registered 16.2 MSF of growth, and flex
Source: Cushman & Wakefield Research
Source: BLS
$4.00
$4.50
$5.00
$5.50
-30
-10
10
30
50
70
2011 2012 2013 2014 2015 2016
Net Absorption, MSF Weighted Asking Rent, $ PSF
5.0%
7.0%
9.0%
11.0%
2011 2012 2013 2014 2015 2016
Historical Average = 8.4%
cushmanwakefield.com | 2
U.S. IndustrialQ3 2016
MARKETBEAT
Developers are Hustling to Bring Product Online BUILD TO SUIT VS. SPECULATIVE CONSTRUCTION (% OF TOTAL)
The Roll Continues for Industrial EXPECT CYCLICAL HIGH ABSORPTION IN 2016 AND STRONG 2017
A Positive Sign for Exporters U.S. EXPORTS ARE NO LONGER DECLINING
Outlook• Much of what drives demand for logistics space links to the
U.S. consumer, and with expected wage and labor market gains, consumption will drive industrial growth.
• U.S. imports, which are closely tied to warehousing demand, will continue to expand on the back of solid domestic demand and subdued import prices. Exports will be modest.
• Net absorption will once again surpass the 220 MSF mark. Leasing demand will balance new deliveries and hold national vacancy steady.
• We anticipate that supply will meet demand for industrial space in 2017. Until then, expect upward pressure on rents to continue.
Source: Federal Reserve
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
product experienced 9.9 MSF of net occupancy gains.
The national industrial vacancy rate continued to decline in the third quarter of 2016, falling by 20 basis points (BPS) from the second quarter and 90 BPS from a year-ago to 5.6%. Industrial vacancy tightened in every region and is currently tracking a full 280 BPS below the 10-year historical average of 8.4%. Warehousing conditions continued to tighten in Q3 2016 as 59 of 79 markets tracked by Cushman & Wakefield saw warehouse vacancy rates decline. In nearly every industrial market vacancy rates have now fallen below prior-cycle lows.
Strong leasing activity by both traditional industrial users and eCommerce-related occupiers continues to fuel rent growth. U.S. industrial rents increased 5.1% in the third quarter of 2016 from a year-ago, with over 40% of industrial markets currently reporting double-digit gains. In many markets, industrial rents are at historic highs, and on a national level the U.S. is witnessing rental rate appreciation for every industrial product type.
On the development front, 159.3 MSF of industrial product has been delivered in 2016, of which 59.6 MSF came online in the third quarter. Major industrial markets, port cities and primary inland distribution hubs have welcomed the majority of industrial deliveries this year — industrial product that is increasingly speculative in nature. Speculative projects account for 108.9 MSF (or 68%) of year-to-date deliveries, and given the tight market, developers continue to break ground on more speculative projects. Currently, there is 214.5 MSF of industrial product under construction, of which 102.1 MSF is expected to come online in the fourth quarter of 2016.
Despite increasing development volumes, quarterly leasing demand has continued to outpace deliveries, but that gap is closing. We continue to see the strongest development activity in the primary markets that have dominated leasing and deliveries this cycle. But development is accelerating across the country with nearly half of all U.S. industrial markets reporting more than 1 MSF under construction. Given the strength of underlying fundamentals and occupiers’ demand for modern, functional distribution space, leasing of newly delivered space is expected to be brisk.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% Build-to-Suit Construction Speculative Construction
-30%
-20%
-10%
0%
10%
20%
30%
2008
2009
2010
2011
2012
2013
2014
2015
2016
Exports, Balance of Payment Basis (Y/Y % Chg., SA)
Inland Empire CA 495,532,371 17,742,804 18,395,253
Jacksonville, FL 104,595,284 814,777 1,418,201
Kansas City, MO 204,155,531 4,539,519 7,759,235
Lakeland, FL 32,528,297 405,060 1,264,036
Las Vegas, NV 108,937,843 1,740,327 1,240,647
Long Island, NY 129,926,108 178,000 569,000
Los Angeles, CA 1,075,836,395 1,553,944 6,195,466
Louisville, KY 141,131,592 4,916,804 6,467,340
Memphis, TN 188,522,906 1,981,513 5,035,152
Miami, FL 152,564,498 1,362,762 4,507,643
Milwaukee, WI 197,466,132 1,295,479 1,098,750
Minneapolis, MN 104,472,070 1,387,759 2,168,800
MarketBeat U.S. Q3 2016 cushmanwakefield.com | 10
Inventory
Inventory Inventory Deliveries YTD Under Construction as of Q3 2016p
Nashville, TN 131,970,543 239,203 924,697
New Haven, CT 48,566,293 0 80,500
New Jersey - Central 334,145,825 2,826,828 6,567,422
New Jersey - Northern 289,076,403 336,708 1,376,765
Oklahoma City, OK 68,540,201 445,666 59,000
Omaha, NE 68,634,237 441,707 1,025,661
Orange County, CA 282,663,728 624,875 222,735
Orlando, FL 109,840,019 632,633 1,799,630
Palm Beach County, FL 39,985,916 329,749 635,760
PA I-81/I-78 Distribution Corridor 251,873,791 11,960,584 14,430,953
Philadelphia, PA 289,240,195 3,886,702 3,108,508
Phoenix, AZ 304,151,338 4,172,407 2,066,259
Pittsburgh, PA 168,120,151 1,264,642 471,031
Portland, OR 192,613,739 981,408 2,641,548
Providence, RI 77,727,305 n/a n/a
Puget Sound - Eastside 61,057,350 298,378 386,534
Raleigh/Durham, NC 51,272,732 253,350 552,273
Richmond, VA 91,701,177 304,600 216,000
Roanoke, VA 49,848,993 0 250,000
Rochester, NY 73,551,473 0 0
Sacramento, CA 134,076,760 96,152 282,254
Salt Lake City, UT 125,295,336 1,749,201 2,134,476
San Antonio, TX 40,843,302 1,493,721 520,551
San Diego, CA 161,134,604 949,300 635,931
San Francisco North Bay, CA 21,416,354 0 313,020
San Francisco Peninsula, CA 39,821,951 0 0
San Jose (Silicon Valley), CA 83,646,398 111,043 563,760
Savannah, GA 49,047,984 1,785,810 5,022,871
Seattle, WA 140,965,606 2,013,517 1,981,566
Southern New Hampshire 48,001,232 0 0
St. Louis, MO 243,464,399 3,196,899 5,043,013
St. Petersburg/Clearwater, FL 51,393,192 0 341,976
Stockton/Tracy, CA 98,377,416 2,216,100 1,074,337
Suburban MD 48,684,918 1,246,170 311,000
Suburban VA 56,855,867 635,182 90,240
Syracuse, NY 42,598,326 172,500 336,000
Tampa, FL 80,232,940 28,500 365,226
Tucson, AZ 41,344,427 863,488 159,971
Tulsa, OK 60,068,675 180,500 152,250
p = preliminary
Methodology
Cushman & Wakefield’s quarterly estimates are derived from a variety of data sources, including its own proprietary database, and historical data from third party data sources. The market statistics are calculated from a base building inventory made up of industrial properties deemed to be competitive in the local industrial markets. Generally, owner-occupied and federally-owned buildings are not included. Older buildings unfit for occupancy or ones that require substantial renovation before tenancy are generally not included in the competitive inventory. The inventory is subject to revisions due to resampling. Vacant space is defined as space that is available immediately or imminently after the end of the quarter. Sublet space still occupied by the tenant is not counted as available space. The figures provided for the current quarter are preliminary, and all information contained in the report is subject to correction of errors and revisions based on additional data received.
Regional Map
WestMidwestSouthNortheast
Jason Tolliver Head of Industrial Research, Americas Tel: +1 317.634.6363 cushmanwakefield.com
Explanation of Terms
Total Inventory: The total amount of industrial space (in buildings of a
predetermined size by market) that can be rented by a third party.
Overall Vacancy Rate: The amount of unoccupied space (new, relet, and
sublet) expressed as a percentage of total inventory.
Absorption: The net change in occupied space between two points in time.
(Total occupied space in the present quarter minus total occupied space from
the previous quarter, quoted on a net, not gross, basis.)
Leasing Activity: The sum of all leases over a period of time. This includes
pre-leasing activity as well as expansions. It does not include renewals.
Overall Weighted Asking Rents: NNN average asking rents weighted by the
amount of available direct and sublease space in industrial properties.
W/D: Warehouse and or distribution properties.
MFG: Manufacturing properties.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 43,000 employees in more than 60 countries help investors and occupiers optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
Cushman & Wakefield Copyright 2016. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by the property owner(s). As applicable, we make no representation as to the condition of the property (or properties) in question.
U.S. Industrial Snapshot Q1 2016MARKETBEAT
cushmanwakefi eld.com | 1
U.S. INDUSTRIAL
Overall Vacancy
Net Absorption/Rent NNN4Q TRAILING AVERAGE
Market IndicatorsQ1 15 Q1 16 12-Month
Forecast
Overall Vacancy 6.8% 6.1%
Net Absorption 52.9M 57.9M
Under Construction 147.8M 175.8M
Weighted Asking Rent (NNN) $5.24 $5.44
Employment IndicatorsQ1 15 Q1 16 12-Month
Forecast
Total Nonfarm Employment 140.8M 143.5M
Industrial Employment 24.9M 25.1M
Unemployment 5.6% 4.9%
$4.00
$4.50
$5.00
$5.50
-30
-10
10
30
50
70
2010 2011 2012 2013 2014 2015 Q1 16
Net Absorption, MSF Weighted Asking Rent, $ PSF
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2010 2011 2012 2013 2014 2015 Q1 16
Historical Average = 8.3%
EconomyThe turbulent start to the year saw confi dence sagging and the economic expansion seemingly on shaky ground. But by the end of March, the U.S. economy had regained solid footing and the industrial property markets registered yet another robust quarter. Strong employment is always a dominant growth driver; it creates new income growth and adds to a solid base of consumer spending. Consumer spending in turn bolsters demand for manufacturing and warehouse space. Over the last 12 months, the U.S. economy has added 2.8 million nonfarm payroll jobs. The construction sector added 301,000 payrolls while the trade, transportation and utilities sector added 499,000 new workers. These industries are among the heaviest users of industrial space.
Cushman & Wakefi eld’s outlook for manufacturing has improved since the beginning of 2016. U.S. factory activity expanded in March for the fi rst time since last August, a sign the nation’s economy is shaking off the eff ects of a strong dollar, depressed oil prices and weakened global growth. While headwinds persist for the manufacturing sector, the recent ISM reading (51.8 in March) suggests that the worst of the manufacturing slump may be over. Also promising, current production has picked up: new factory orders rose to their highest level since November 2014, and the backlogs of orders expanded for the fi rst time since last summer – all signs suggesting the pickup in industrial production is unlikely to falter in the near term.
That said, businesses continue to work through elevated stockpiles accumulated over the fi rst half of 2015 when record inventories outpaced demand. There has been progress: inventories have declined in four of the past fi ve months, with the one exception being a fl at reading in December. But despite these back-to-back inventory declines, the inventory-to-sales ratio remains elevated at 1.41 which suggests businesses will need to continue to work through the inventory overhang through the fi rst half of 2016, hampering manufacturing and curbing GDP growth.
Market OverviewU.S. industrial markets absorbed 57.8 million square feet (msf) of space in the fi rst quarter of 2016, 9.3% more compared to fi rst quarter 2015. This marks 24 consecutive quarters of positive net occupancy gains for the sector, placing the current expansion among the longest – and the strongest – on record. The U.S. industrial market shed over 182 msf of space during the economic downturn but has absorbed more than 990 msf during the current expansion.
The booming industrial expansion has been more broad-based than previous expansions, and widespread occupancy gains continue to be registered across the country. Twenty-two markets report over 1 msf of positive net absorption during the fi rst quarter of the year. Occupier demand for modern industrial space also continues to grow, with new construction leasing of speculative and design-build industrial product delivered in the past 24 months accounting for over 75% of fi rst quarter net absorption.
Source: Cushman & Wakefi eld Research
Source: BLS
U.S. Industrial Snapshot Q1 2016MARKETBEAT
cushmanwakefi eld.com | 2
Top Five Years for Industrial Net Absorption2016 IS ON TRACK TO BE ANOTHER STRONG YEAR
Development Trends by Type (% of Total)
SPEC CONSTRUCTION IS CONTROLLED BUT GROWING
E-commerce SalesGROWTH OF ONLINE SALES IS A BOON FOR INDUSTRIAL
240 240
195 194
171
220
0
50
100
150
200
250
2014 2015 1996 2005 2013 2016
Q1 16
0%
3%
6%
9%
12%
15%
18%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
$0
$100
$200
$300
$400
$500
$600
Total E-commerce $ (mill)
0%
30%
60%
90%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
BTS Speculative
Outlook• The demand drivers for industrial remain fi rmly intact. Much
of what drives demand for industrial space links to the U.S. consumer, and with expected wage and labor market gains, the consumer will have the wherewithal to drive growth.
• U.S. imports, which are closely tied to warehousing demand, will continue expanding in 2016 on the back of solid domestic demand and subdued import prices. Exports will rebound modestly.
• Expect 2016 to be another year where net absorption passes the 200 msf mark. Leasing demand will balance new deliveries and hold national vacancy steady.
• Rent growth is expected to drive value in 2016. Gains will continue to permeate all product types but will be most pronounced for product located in supply constrained infi ll locations.
The national industrial vacancy rate continued to decline in the fi rst quarter, falling by 20 basis points (bps) from the prior quarter and 70 bps from the prior year to 6.1%. Industrial vacancy is currently tracking at its lowest level of the past 30 years and is now a full 220 bps below its 10-year historical average. Vacancy rates declined or held fi rm during the quarter in 44 of the 79 markets tracked by Cushman & Wakefi eld. Strong leasing fundamentals have also driven vacancies for each industrial product lower than at any point in the last cycle.
The shopping fulfi llment channel migration, to e-commerce, continues to support fundamentals by giving rise to net new users of industrial space. Over the past three years, e-commerce related tenant requirements have accounted for more than 40% of industrial net absorption. With e-commerce sales growing fi ve times faster than overall retail sales, there is expected to be signifi cant requirements for new industrial space in the future.
With vacancy at such low levels, there is a lack of functional, modern space on the market, and developers are responding with more speculative construction. In the fi rst quarter, speculative projects under construction totaled 109.9 msf, which comprised 62.5% of the total 175.8 msf currently under construction. Despite this uptick in speculative construction, it remains a controlled development environment and the market is still well below the levels of development observed at the peak of the last cycle. From 2004 to 2009 over 776 msf of industrial product was delivered, 27% more than the 566 msf of product brought online during the current expansion.
U.S. industrial rents increased 3.8% in the fi rst quarter from their year-ago level. Industrial rents increased in 68 of 79 markets tracked by Cushman & Wakefi eld year over year, with over one-fi fth of the markets across the country now registering double-digit gains. In many markets, industrial rents are currently either at their historic highs or quickly approaching them; on a national level we are witnessing rental rate appreciation for every industrial product type.
Source: U.S. Census Bureau
Source: Cushman & Wakefi eld Research
Source: Cushman & Wakefi eld Research
MarketBeat U.S. Industrial Snapshot Q1 2016 cushmanwakefi eld.com | 3
Greater Los Angeles 1,076,849,896 556,949 2,870,185
Greenville, SC 188,670,438 0 7,078,800
Hampton Roads, VA 94,306,800 0 43,000
Hartford, CT 92,057,251 0 0
Houston, TX 390,996,249 2,846,884 7,850,509
Indianapolis, IN 246,029,723 1,273,669 1,041,200
Inland Empire CA 480,393,988 2,907,803 13,372,419
Jacksonville, FL 104,372,430 510,433 392,545
Kansas City, MO 202,131,971 2,425,985 4,961,287
Lakeland, FL 32,437,762 345,000 605,920
Las Vegas, NV 110,197,888 722,731 1,857,173
Long Island, NY 129,459,126 0 722,000
Louisville, KY 138,222,977 2,008,189 3,459,669
Memphis, TN 188,614,202 1,781,513 604,000
Miami, FL 141,577,995 206,220 3,013,729
Milwaukee, WI 197,511,905 541,315 1,028,696
Minneapolis, MN 104,671,130 207,000 1,738,000
MarketBeat U.S. Industrial Snapshot Q1 2016 cushmanwakefi eld.com | 10
Inventory
Inventory Inventory Deliveries YTD Under Construction as of Q1 2016p
Nashville, TN 197,773,127 148,050 4,677,760
New Haven, CT 48,566,293 0 80,500
New Jersey - Central 333,844,211 930,030 3,200,956
New Jersey - Northern 289,927,681 315,000 637,131
Oklahoma City, OK 68,724,246 0 428,203
Omaha, NE 68,564,706 264,328 598,842
Orange County, CA 282,501,296 405,907 393,968
Orlando, FL 109,276,118 142,696 1,338,125
Palm Beach County, FL 38,213,098 225,198 513,270
PA I-81/I-78 Distribution Corridor 245,885,732 5,990,979 11,376,988
Philadelphia, PA 285,992,760 724,912 4,025,030
Phoenix, AZ 302,044,574 1,590,871 2,696,317
Pittsburgh, PA 170,700,811 396,302 1,137,918
Portland, OR 191,887,159 296,732 1,893,223
Providence, RI 77,727,305 n/a n/a
Puget Sound - Eastside 61,032,672 230,378 0
Raleigh/Durham, NC 48,632,875 133,350 512,723
Richmond, VA 90,583,794 83,000 221,000
Roanoke, VA 45,060,061 n/a n/a
Rochester, NY 73,551,473 0 0
Sacramento, CA 133,898,042 0 0
Salt Lake City, UT 123,265,993 0 2,927,131
San Antonio, TX 39,847,171 524,137 629,144
San Diego, CA 160,728,634 543,330 766,800
San Francisco North Bay, CA 22,855,664 0 268,000
San Francisco Peninsula, CA 39,787,911 0 0
San Jose (Silicon Valley), CA 83,871,014 0 563,760
Savannah, GA 47,145,374 0 2,841,185
Seattle, WA 140,384,596 754,483 1,388,218
Southern New Hampshire 48,001,232 0 0
St. Louis, MO 240,418,958 942,060 3,693,338
St. Petersburg/Clearwater, FL 51,416,782 0 0
Stockton/Tracy, CA 97,748,759 1,749,100 467,000
Suburban MD 47,830,665 420,880 1,019,500
Suburban VA 56,614,258 393,573 289,109
Syracuse, NY 42,427,322 15,000 184,000
Tampa, FL 80,452,998 0 0
Tucson, AZ 40,538,074 0 805,200
Tulsa, OK 60,031,175 143,000 189,750
p = preliminary
About Cushman & Wakefi eld
Cushman & Wakefi eld is a leading global real estate services fi rm that helps clients transform the way people work, shop, and live. The fi rm’s 43,000 employees in more than 60 countries provide deep local and global insights that create signifi cant value for occupiers and investors around the world. Cushman & Wakefi eld is among the largest commercial real estate services fi rms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefi eld.com or follow @CushWake on Twitter
Methodology
Cushman & Wakefi eld’s quarterly estimates are derived from a variety of data sources, including its own proprietary database, and historical data from third party data sources. The market statistics are calculated from a base building inventory made up of industrial properties deemed to be competitive in the local industrial markets. Generally, owner-occupied and federally-owned buildings are not included. Older buildings unfi t for occupancy or ones that require substantial renovation before tenancy are generally not included in the competitive inventory. The inventory is subject to revisions due to resampling. Vacant space is defi ned as space that is available immediately or imminently after the end of the quarter. Sublet space still occupied by the tenant is not counted as available space. The fi gures provided for the current quarter are preliminary, and all information contained in the report is subject to correction of errors and revisions based on additional data received.
Regional Map
WestMidwestSouthNortheast
Cushman & Wakefi eld Copyright 2016. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by the property owner(s). As applicable, we make no representation as to the condition of the property (or properties) in question.
Jason TolliverHead of Industrial Research, AmericasTel: +1 317.634.6363cushmanwakefi eld.com
Explanation of Terms
Total Inventory: The total amount of industrial space (in buildings of a
predetermined size by market) that can be rented by a third party.
Overall Vacancy Rate: The amount of unoccupied space (new, relet, and
sublet) expressed as a percentage of total inventory.
Absorption: The net change in occupied space between two points in time.
(Total occupied space in the present quarter minus total occupied space from
the previous quarter, quoted on a net, not gross, basis.)
Leasing Activity: The sum of all leases over a period of time. This includes
pre-leasing activity as well as expansions. It does not include renewals.
Overall Weighted Asking Rents: NNN average asking rents weighted by the
amount of available direct and sublease space in industrial properties.
W/D: Warehouse and or distribution properties.
MFG: Manufacturing properties.
cushmanwakefi eld.com
U.S. Industrial Snapshot Q3 2015MARKETBEAT
EconomyDespite concerns about slower growth in China and increased volatility in the U.S. and global fi nancial markets, the U.S. economy maintained its trajectory of steady and modest growth in the third quarter. Nonfarm job creation is on track to increase at a rate of 2.1% in 2015—its fastest pace in 15 years. As more Americans found work, new home construction and sales of existing homes have vastly improved. This bodes well for the industrial sector as a boost in housing typically translates into greater demand for warehouse space to store building materials. Moreover, housing also has a multiplier impact on consumer spending via the wealth eff ect.
Market OverviewHealthy industrial fundamentals can still be found across the nation and the industrial sector continues to perform strongly, however, despite the slowdown in economic activity in some areas of the country. Net absorption of 57.9 million square feet (msf) in the third quarter refl ected this strength, and brought the year-to-date occupancy gain in industrial properties to 173.1 msf. This puts the U.S. industrial sector on track to have another record-setting year in terms of demand for space. Signifi cant demand, space absorption and low vacancies continue to put upward pressure on rents in most major industrial hubs. The weighted average U.S. rental rate reached $5.34 NNN in the third quarter, a year-over-year increase of 4.8%. About 70% of all markets are experiencing positive rental growth, and 45% have seen year-over-year growth above 5% with double-digit gains in 14 markets.
The nationwide average vacancy of 7.4% clearly refl ects the fact that market-level supply pipelines, though growing, are still below the pace of demand in most markets. Secondary markets have seen an increase in development, but activity in primary markets, particularly distribution center hubs, has been stronger. There was 182.3 msf of construction underway across the country at the end of the third quarter.
OutlookThe economic environment in 2016 should support continued job gains, pushing the unemployment rate down below 5%, and improving the outlook for the American consumer. The shift toward online shopping will continue to be a leading demand driver for the industrial sector. Requirements for big-box space are common among e-commerce tenants, but there is also growing demand for smaller- and mid-size buildings. Increasing service expectations and the need to access labor are leading e-commerce companies to establish smaller infi ll locations around major population centers. Demand for Class A logistics product will remain strong and continue to fuel the rapid increase in construction. The need to replace aging stock should also drive a signifi cant volume of new development. Our forecast is for net absorption to continue to outpace new supply in 2016; however, the demand/supply imbalance is expected to narrow.
U.S. INDUSTRIAL
Overall Vacancy
Net Absorption/Rent NNN4Q TRAILING AVERAGE
Market IndicatorsQ3 14 Q3 15 12-Month
Forecast
Overall Vacancy 8.3% 7.4%
Net Absorption 67.2M 57.9M
Under Construction 160.9M 182.3M
Weighted Asking Rent (NNN) $5.10 $5.34
Employment IndicatorsQ3 14 Q3 15 12-Month
Forecast
Total Nonfarm Employment 139.4M 142.2M
Industrial Employment 23.3M 23.6M
Unemployment 6.1% 5.2%
$4.00
$4.50
$5.00
$5.50
-40,000,000
-5,000,000
30,000,000
65,000,000
2010 2011 2012 2013 2014 Q3 15
Net Absorption, SF Weighted Asking Rent, $ PSF
6.5%
7.5%
8.5%
9.5%
10.5%
2010 2011 2012 2013 2014 Q3 15
Historical Average = 9.0%
cushmanwakefi eld.comMarketBeat U.S. Industrial Snapshot Q3 2015
Greater Los Angeles 1,076,147,759 2,495,573 2,283,010
Greenville, SC 186,145,960 0 4,844,000
Hampton Roads, VA 94,243,759 699,000 128,209
Hartford, CT 91,812,974 1,500,000 0
Houston, TX 385,098,839 6,341,907 10,399,753
Indianapolis, IN 252,439,240 4,895,086 1,600,000
Inland Empire CA 471,059,648 15,153,753 19,445,832
Jacksonville, FL 103,503,458 508,094 1,601,976
Kansas City, MO 199,248,032 2,706,466 4,108,648
Lakeland, FL 29,710,946 397,400 376,170
Las Vegas, NV 102,856,003 1,989,630 3,157,576
Long Island, NY 129,117,332 0 475,000
Louisville, KY 131,338,827 2,188,295 3,535,380
Memphis, TN 186,663,234 2,596,064 1,556,113
Miami, FL 160,843,601 841,008 1,076,390
Milwaukee, WI 195,431,964 1,337,601 1,411,398
Minneapolis, MN 104,934,275 2,696,530 1,899,360
Nashville, TN 196,095,738 370,905 3,108,606
cushmanwakefi eld.comMarketBeat U.S. Industrial Snapshot Q3 2015
Inventory
Inventory Inventory Deliveries YTD 2015 UC as of Q3 2015p
New Haven, CT 48,432,317 0 82,251
New Jersey - Central 331,312,681 2,634,675 2,046,778
New Jersey - Northern 290,427,626 0 920,535
Oklahoma City, OK 69,522,067 345,000 1,655,395
Omaha, NE 68,349,607 399,244 811,504
Orange County, CA 281,710,879 502,882 1,267,078
Orlando, FL 109,410,639 1,313,745 839,434
Palm Beach County, FL 42,412,559 745,634 668,410
PA I-81/I-78 Distribution Corridor 237,320,372 6,970,344 12,319,667
Philadelphia, PA 283,375,803 1,898,064 5,245,342
Phoenix, AZ 302,642,401 3,991,073 4,206,215
Pittsburgh, PA 168,862,823 842,422 893,242
Portland, OR 188,465,888 1,762,862 3,110,189
Providence, RI 77,727,305 n/a n/a
Raleigh/Durham, NC 49,910,493 160,080 715,350
Richmond, VA 90,517,421 403,060 222,800
Roanoke, VA 44,227,910 n/a n/a
Rochester, NY 73,551,473 88,500 13,332
Sacramento, CA 134,111,126 243,147 943,738
Salt Lake City, UT 122,363,219 2,346,211 1,313,667
San Antonio, TX 38,155,019 689,115 1,448,937
San Diego, CA 159,530,676 111,638 439,638
San Francisco North Bay, CA 22,122,860 100,000 0
San Francisco Peninsula, CA 39,580,035 0 0
San Jose, CA 83,909,593 0 0
Savannah, GA 42,647,344 448,000 0
Seattle, WA 133,168,893 2,193,826 1,778,078
Southern New Hampshire 46,731,270 614,240 300,000
St. Louis, MO 238,509,655 1,148,272 3,951,821
St. Petersburg/Clearwater, FL 51,515,762 0 0
Stockton/Tracy, CA 48,856,682 1,196,000 1,001,378
Suburban MD 47,338,763 764,781 1,024,300
Suburban VA 47,314,800 0 610,400
Syracuse, NY 42,647,344 0 155,000
Tampa, FL 80,459,780 165,000 0
Tucson, AZ 40,246,981 270,000 800,000
Tulsa, OK 59,888,175 1,300,000 334,750
About Cushman & Wakefi eld
Cushman & Wakefi eld is a leading global real estate services fi rm that helps clients transform the way people work, shop and live. The fi rm’s 43,000 employees in more than 60 countries provide deep local and global insights that create signifi cant value for occupiers and investors around the world. Cushman & Wakefi eld is among the largest commercial real estate services fi rms with revenues of $5 billion across core services of agency leasing, asset services, capital markets, facility services (branded C&W Services), global occupier services, investment & asset management (branded DTZ Investors), project & development services, tenant representation and valuation & advisory. To learn more, visit www.cushmanwakefi eld.com or follow @CushWake on Twitter.
Methodology
Cushman & Wakefi eld’s quarterly estimates are derived from a variety of data sources, including its own proprietary database, and historical data from third party data sources. The market statistics are calculated from a base building inventory made up of offi ce properties deemed to be competitive in the local offi ce markets. Generally, owner-occupied and federally-owned buildings are not included. Single tenant buildings and privately-owned buildings in which the federal government leases space are included. Older buildings unfi t for occupancy or ones that require substantial renovation before tenancy are generally not included in the competitive inventory. The inventory is subject to revisions due to resampling. Vacant space is defi ned as space that is available immediately or imminently after the end of the quarter. Sublet space still occupied by the tenant is not counted as available space. The fi gures provided for the current quarter are preliminary, and all information contained in the report is subject to correction of errors and revisions based on additional data received.
Regional Map
WestMidwestSouthNortheast
Explanation of Terms
Total Inventory: The total amount of offi ce space (in buildings of a predetermined size by market) that can be rented by a third party.
Vacancy Rate: The amount of unoccupied space (new, relet, and sublet) expressed as a percentage of total inventory.
Absorption: The net change in occupied space between two points in time. (Total occupied space in the present quarter minus total occupied space from the previous quarter, quoted on a net, not gross, basis.)
Weighted Asking Rents: NNN average asking rents.
Cushman & Wakefi eld Copyright 2015. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by the property owner(s). As applicable, we make no representation as to the condition of the property (or properties) in question.
U.S ResearchTel: +1 202 463 2100
cushmanwakefi eld.com
DisclaimerAs you are probably aware, on September 1 the successful merger between Cushman & Wakefi eld and DTZ was fi nalized, creating one of the world’s largest real estate services fi rms. We are currently going through the process of merging both legacy Cushman & Wakefi eld and DTZ datasets, and the preliminary results of the initial eff ort to merge the two data sets are reported in our Q3 indicators.
We also expect to deliver Q4 consistent with historical deliverables, with a transition to a merged dataset being delivered for Q1 2016. This enhanced dataset may diff er from what you have received in the past.
We believe the changes we are making following the integration will result in a more robust and comprehensive dataset for you. If you have any issues once you receive fi rst quarter results, we’d be happy to discuss other options. Your satisfaction is our top priority.