Industrial real estate market conditions remain tight, with a shortage of space, notes CBRE


The lingering theme of demand exceeding supply in the industrial real estate market remains fully intact, according to data released this week by Los Angeles-based industrial real estate developer CBRE.

CBRE explained that after a banner year, in the U.S. industrial real estate market in 2021, market conditions continued into the first quarter, with strong demand for space remaining the common theme.

CBRE’s first quarter results included:

-an overall vacancy rate in Q1 of 3.1%, showing how tight market conditions have reduced absorption compared to Q1 2022;
-net absorption was 93.8 million square feet (MSF), marking an increase of 10.4%, while remaining above the 10-year average;
– construction completions amounted to 86.2 MSF (of which 62% pre-let), up 27.5% per year but down 27.8% compared to the fourth quarter of 2021;
– activity under construction amounted to 545.4 MSF (including 32.5% already pre-let), and Dallas/Ft. Worth, Atlanta and the PA I-78/81 corridor and the Inland Empire comprising one-third of the total; and
-average asking rent increased 3.7% sequentially and 11.8% annually to $8.94 per square foot, a new record

“Demand from occupants needing safety stock to counter supply chain disruptions is expected to drive further appreciation in rental rates and record vacancy despite a large number of new developments this year,” said declared CBRE.

Matthew Walaszek, research director, industrial and logistics occupier at CBRE, described first quarter industrial real estate activity as good but not great, with trends continuing towards positive tailwinds driving the need for more space and the demand once again outstripping supply while coming off a record high. year in 2021.

“It’s impossible to match, it was just a good neighborhood,” he said. “It is obvious that the market is still on a good footing. On the investor side, this could be considered excellent, even if interest rates rise, and on the occupier side, of course, there are challenges with regard to prices. Momentum [from 2021] were postponed and businesses continued to rent space in response to strong consumer demand. It’s really almost fascinating, because of what’s going on with inflation, and we’re looking at that closely to see how that affects the demand for industrial space, in particular.

Even with inflation at a 40-year high, he said consumer spending remains strong even though prices are skyrocketing for so many different things, which, in turn, drives the need for more space. , according to Walaszek, with the caveat that this is a risk for the future, but not in the first quarter.

Demand for industrial real estate space remains healthy for different types of occupiers, Walaszek observed, including 3PLs, general wholesalers, food and beverage, manufacturers and big-box retailers, collectively maintaining the rate of occupancy. Q1 vacancy at 3.1%, well below the historical average. by 5.9%.

CBRE observed that despite a large amount of new offerings in the industrial real estate pipeline, strong demand for first- and second-generation space is expected to keep availability at an all-time low this year.

To that end, Walaszek explained that tight market conditions are expected to continue given the magnitude of demand.

“We expect the vacancy rate to hover around current levels,” he said. “I don’t know if it’s going to drop dramatically yet, it could drop further. We are almost reaching equilibrium. As for rents, they will continue to rise, because in many markets there is practically no space available. Rents only have one place to go, and that’s going up. We will continue to see double-digit rent growth, in terms of average net demand, and then taken rents go up even more than that. It makes it feel a bit difficult for occupants, but it’s still a very hot market.

In CBRE’s net absorption list for major markets, Chicago led the way at 10.6 MSF, followed by Phoenix at 9.0 MSF. Houston, Dallas/Ft. Worth and Charleston, at 7.4 MSF, 6.6 MSF and 5.4 MSF, respectively. For the markets with the most space under construction, the top five markets were: Dallas/Ft. Worth, at 57.3 MSF; Inland Empire, at 34.4 MSF; Corridor Pennsylvania/I-78/81, at 33.5 MSF; Atlanta, at 30.5 MSF; and Phoenix, at 26.6 MSF.

About the Author

Jeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics management, Modern material handlingand Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine where he covers all aspects of the supply chain, logistics, freight forwarding and material handling industries on a daily basis. Contact Jeff Berman


Comments are closed.