Supply Shortfall

Key Trends

  • The regional vacancy rate decreased from 6.6 to 6.4 percent during the first two quarters of 2017.
  • Net absorption, at 11.5 million square feet, was off from last year’s record levels, but historically still strong.
  • Asking rents increased by 1.3 percent from the end of the fourth quarter.
  • New construction deliveries increased during the second quarter after a lull at the beginning of the year.
  • With fewer investment-grade offerings, investors sought value-add properties and forward sales.

Single-digit vacancies prevailed in the regional industrial markets in 2017. Demand for new construction and previous generation buildings increased space shortages, particularly for 100,000 square feet and greater. The rapid absorption of speculative construction and an increase in RFP’s for potential build-to-suits have developers securing and entitling new development sites.

In addition to sustained demand for bulk distribution space, there has been a noticeable increase in manufacturing requirements. This includes expansions to existing facilities, consolidating multistate operations into a single efficient location or leasing additional warehouse space to dedicate more room for production functions.