ATLANTA, GA (Aug. 5, 2013) – On the road to recovery, the
industrial sector has been more of a tortoise than a hare. Fueled by the
growing e-commerce market and the recovering housing sector, the industrial
segment appears set to continue its slow and steady improvement in the months
ahead.
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| Michael Bull |
That was the consensus of a panel of experts on the most
recent episode of the “Commercial Real Estate Show” radio program, hosted by Michael
Bull of Bull Realty. Bull and his guests discussed vacancy rates, rent
growth and the small-scale return of speculative construction, among other
topics.
The national vacancy rate for the warehouse/distribution
market fell by 10 basis points from the first quarter to the second quarter, to
11.8 percent, said Ryan Severino, senior economist at Reis.
Additionally, the average asking rent grew .5 percent to $4.74 per square foot,
while the average effective rent also rose by .5 percent to $4.30 per square
foot.
For flex/R&D properties, the national vacancy rate also
declined 10 basis points to 13.8 percent, according to Severino. The average
asking rent increased .1 percent to $8.82 per square foot, and the average
effective rent grew .1 percent to $7.84 per square foot.
 |
| Ryan Severino |
The improving fundamentals are gradually making the
industrial sector less of a tenant’s market, guests noted. “As more space gets
absorbed, particularly the space that people find appealing that’s the right
location and size, it does shift the dynamics of the lease negotiation a little
bit more toward the landlord,” said Larry Callahan, CEO of Pattillo
Industrial Real Estate.
Looking ahead, expect more slow improvement in the sector,
Severino said. “We are still waiting to see an acceleration in the underlying
economic growth before we see more of an acceleration in the industrial market
fundamentals,” he said. “I would expect the rate of improvement to be about the
same as we’ve seen over the last six to 12 months.”
 |
| Larry Callahan |
Online retailers are driving much of the new demand,
according to the show guests. “E-commerce users are having a significant impact
on the industrial market,” Severino said. “They are clearly preferring new
centers with large contiguous blocks of space with more dock doors, preferably
cross-decked, with greater clear heights and floors that can support heavier
loads.”
A reviving housing market could also help drive down
industrial vacancy rates in the future as suppliers need more warehouse space
for their materials, Callahan added. “All of the people that serve housing like
carpeting, flooring, cabinetry and air conditioning are all going to pop up
with it as building comes back,” he said.
 |
| Brian Cardoza |
Guests also noted that both build-to-suit and speculative
construction are taking place, although the latter is happening to a decidedly
limited extent. “Certainly we are doing build-to-suits,” said Brian Cardoza,
senior leasing manager at Prologis. ”For spec, we are being strategic. There
are certain markets where we are either under construction or considering going
under construction.”
“There are places where we are seeing the dynamics reach a
point where it makes sense to [build speculative developments],” Callahan
added. “We don’t expect a flood of it but people are tip-toeing back into the
market.”
The entire industrial market episode is available for
download at www.CREshow.com. The next “Commercial
Real Estate Show” will be available on Aug. 8 and will feature an update on
asset and property managment.
For a complete copy of the company’s news release, please
contact:
Stephen Ursery
The Wilbert Group
404.405.2354
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