I&L Market Holds Up Heading into Q4

  • The industrial & logistics (I&L) overall vacancy rate ticked up 10 bps in Q3 to 4.4% due to an increase in new completions. Net absorption totaled 45.4 million sq. ft. in Q3 and 204.6 million sq. ft. on a rolling 12-month basis.
  • Net absorption increased by 16.8% quarter-over-quarter to 45.4 million sq. ft., marking the 38th consecutive quarter of positive net absorption.
  • The 55.7 million sq. ft. of new supply delivered in Q3 (224.2 million sq. ft. on rolling 12-month basis) was up 12.3% quarter-over-quarter but down 11.2% year-over-year.
  • Net asking rents rose 1.3% quarter-over-quarter in Q3 to average $7.57 per sq. ft.—the highest level since CBRE began tracking the metric in 1989. Rents have increased 5.7% year-over-year, more than 2 percentage points above the average annual growth rate since 2012.
  • E-commerce, food & beverage and home improvement companies continue to drive leasing activity, and many of these users are expanding in several industrial hubs.
  • An expected fall in GDP growth to 2.2% in 2019 from 2.9% last year has not had a dramatic impact on I&L market performance given strong jobs and wage growth.
  • Consumer sentiment remains strong and the unemployment rate is at a 50-year low of 3.5%. This, coupled with rising business inventories and industrial production, is highly supportive of the I&L sector.
  • With continued high levels of user demand and more available space options due to recent deliveries, strong gains in net absorption should occur in Q4.