Industrial Market Remains Solid in 3Q

The industrial market performed surprisingly well in the third quarter, defying the housing slump, the credit squeeze and slower economic growth, according to a new report

Net absorption totaling 45 million square feet was the strongest quarterly performance this year and well ahead of the 30 million square feet delivered to the market, according to Grubb & Ellis.

The vacancy rate was unchanged at 7.6 percent. It has been fluctuated by less than 10 basis points in the last five quarters, Grubb & Ellis said.

Third quarter vacancy was lowest in Los Angeles at a negligible 1.6 percent and highest in Memphis at 16.4 percent, among major U.S. markets. Over the past four quarters, vacancy has plummeted by 410 basis points in Wichita, the beneficiary of robust global demand for aircraft. Austin and San Antonio tightened by more than 200 basis points, though neither is a major logistics hub. At the other extreme, vacancy rose by 280 basis points in Palm Beach County, Fla., followed by Seattle, Las Vegas and San Diego.

Construction activity set another new peak for this cycle, ending the quarter at 143 million square feet. Riverside-San Bernardino led all markets with just over 23 million square feet in the pipeline. Dallas-Fort Worth, with 18.5 million square feet underway, is mounting a challenge to the long-dominant Inland Empire.

The average asking rental rate for available warehouse/distribution space ended the quarter at $4.61 per square foot per year triple net, a gain of 3.6 percent from a year ago, according to Grubb & Ellis. Rent was highest in the Long Island, N.Y., market at $8.61, followed closely by the two South Florida markets of Palm Beach and Broward counties. Tenants in search of a bargain may want to look at Columbus and Memphis, major logistics hubs with average rental rates of $2.66 and $2.69, respectively.

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