Another Banner Year
U.S. industrial net absorption rose to an all-time high of 284.9 million square feet (msf) in 2018. It has now registered over 240 msf for five consecutive years – the strongest run on record. The national industrial vacancy rate declined slightly to 4.8% for all product types in 2018 – a new historic low – with market conditions tightening slightly in the Northeast, Midwest and South. Average asking rents for all industrial product across the U.S. reached a new nominal high of $6.14 per square foot (psf).
Outlook
• As the consumers goes, so goes the industrial market. Fortunately, real consumer spending is forecast to grow 2.6% in 2019 – a growth rate more than sufficient to power demand for industrial real estate.
• Net absorption is forecast to surpass 240 msf in 2019 for a sixth consecutive year, with demand for all regions and all product types growing.
• The greatest uptick in leasing activity will be in the 10,000-to-100,000-sf and the 300,000-to-500,000-sf segments. Leasing activity in the 100,000-to-300,000-sf range will strengthen from 2018 levels, while activity within the 500,000-sf-and-larger-size range is expected to be on par with 2018 levels.
• Increased speculative supply will place upward pressure on vacancy. We forecast average annual vacancy to rise 30 to 40 bps to between 5.1% and 5.2%% by year-end 2019.
• Rental rate appreciation will continue, although rent growth will slowly begin to decelerate in 2019.
• Port markets and infill-sited submarkets of populated inland distribution hubs are where U.S. rent growth will be strongest.
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