Sector posts 32nd consecutive quarter of supply decline
.jpg)
The vacancy rate for the industrial real estate sector continued to tighten in the second quarter of 2018, the 32nd consecutive sector in which supply declined.
There was a drop of 10 basis points in the vacancy rate to 7.2% marking the lowest since 2000 according to a report from Dallas-based advisory firm BBG.
The markets posting the largest declines were New Haven, Conn. (down 430 bps), Tucson (down 310 bps), Sacramento (down 260 bps), and Jacksonville, (down 220 bps).
The report highlights the rise in online shopping for driving the demand for warehouse and distribution centers. Demand outpaced supply by 22 million square feet in Q2 2018, although this was down from 65 m sqft in the same period of 2017.
Strong outlook
The strong industrial market is expected to remain that way for the foreseeable future, BBG says, as all indicators point to the fast-growth trajectory for e-commerce.
The location of industrial CRE is increasingly shifting towards those with larger population hubs, compared to their traditional location in low-density areas where costs were lower.
"The tremendous growth in e-commerce has significantly transformed the industrial market to become one of the most active in the commercial real estate sector,” said BBG CEO Chris Roach. “We're continuing to see increasing demand for our services from companies in need of these facilities, in order to receive and ship products to customers' homes and physical retail locations. While more warehouse and distribution centers are being built or renovated to accommodate demand, we anticipate that the direction of the vacancy rate won't change dramatically in the near future, as many companies are in the process of setting up their e-commerce operations."
