Monday, April 22, 2013

Steady Progress: Industrial Real Estate Continues to Grow Healthier



Michael Bull in radio booth
 ATLANTA, GA (April 22, 2013) – Buoyed by improvements in the overall economy and the housing market, the U.S. industrial real estate sector continued to strengthen in first-quarter 2013 and is set for a promising future.

 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. The episode provided an enlightening look at industrial real estate’s performance in the first quarter. Topics included vacancy rates, investment sales, active tenants and cap rates.

Net absorption of industrial real estate in the 54 largest U.S. markets totaled 25 million square feet in the first quarter, said Rene Circ, director of research for PPR, a CoStar-owned firm. That figure, while a good bit below the 40 million square feet of absorption typical of a pre-recession quarter, is still about three times larger than first-quarter 2012’s total, according to Circ.

Rene Circ
At the same time that demand is growing, new supply continues to remain “exceptionally low,” Circ said. About 13 million square feet of new industrial facilities were delivered in the United States during the first quarter, and roughly 38 million square feet of facilities were under construction at the end of March. Both figures are well below historical averages, Circ noted.

 Consequently, the national vacancy rate for the industrial sector dipped to 8.2 percent in the first quarter, a 20-basis-point decline from the preceding quarter and a 100-basis-point drop from one year earlier, Circ noted. The average rent increased by 2.5 percent on a year-over-year basis during the quarter.

Jim Brice
Overall, “we had a really good quarter during the first three months of the year,” Circ said. The national vacancy rate could drop to about 7.7 percent by year’s end, he added.

 Much of the tenant activity in the past two years has centered around e-commerce firms moving into large distribution facilities, said Jim Brice, a partner with Holt Lunsford Commercial, a Dallas-based commercial real estate firm. However, smaller tenants – those occupying 300,000 square feet or less – have started to return to the sector as suppliers respond to an improving housing market, he added.
  
Rob Riner

 “Everything that goes into a house has to be in a warehouse,” Brice said. “So as home-building increases, there’s no question [warehousing is] going to increase as well.”

 The industrial sector has improved to the point that some spec construction is taking place around the country, and REITs are responsible for more than 90 percent of that activity, according to Rob Riner, a partner in the Dallas office of Panattoni Development. “It’s easy for REITs since they don’t have to go do a normal bank loan that other equity sources will sometimes have to do,” Riner said.

 The entire episode on the U.S. industrial market is available for download at www.CREshow.com. The next “Commercial Real Estate Show” will be available April 25 and will examine the U.S. office market.

For a complete copy of the company’s news release, please contact:

Stephen Ursery
The Wilbert Group
Office: (404) 965-5026
Cell: (404) 405-2354
  

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