Steady as She Goes: Market Remains Healthy Despite Potential Headwinds

  • The U.S. industrial & logistics (I&L) sector remained healthy in Q2 2019 with a historically low vacancy rate of 4.3% and an availability rate that held steady at 7.1%. Completions exceeded net absorption by 10.7 million sq. ft. based on available square footage.1
  • The 41.4 million sq. ft. of new supply delivered in Q2 was down 1.9% quarter-over-quarter and by 20.0% year-over-year.
  • The under-construction pipeline grew 3.6% quarter-over-quarter to 293.2 million sq. ft.
  • Net asking rents increased by 0.4% quarter-over-quarter to $7.50 per sq. ft.—the highest level since CBRE Econometric Advisors began tracking the metric in 1989. Rents have increased 6.4% year-over-year, which is 2 percentage points above the average annual growth rate since 2012.
  • Despite concerns over global trade tensions, demand for logistics space remains strong overall as e-commerce, food & beverage and home improvement companies continue to drive leasing activity. 
  • GDP growth is forecast to fall to 2.3% in 2019 from 2.9% last year. Nevertheless, a still robust labor market and rising wages will be a major driver of overall economic growth and I&L sector performance.
  • Consumer sentiment remains strong and the unemployment rate remains historically low (3.7%). Coupled with rising business inventories and industrial production, this is highly supportive of the I&L sector.
  • The continued strength of the U.S. dollar and resilient consumer activity will likely generate more demand for imports, which is positive for the I&L sector. A dollar increase in imports consumes three times as much warehouse space as a dollar increase in exports.

1Net absorption is calculated based on the availability (includes space that is occupied but marketed as available), or the net change in occupied space during that period, measured by the sq. ft. completions less any change in available sq. ft. Another way to calculate it is by using the vacant available sq. ft. (space that is unoccupied and available) to determine net absorption, which produces a figure much more in line with the deliveries for Q2.