The decline in vacancy rates for logistics real estate will accelerate this year as resurgent demand outstrips slow growth in supply, an industrial real estate firm said in a report on market trends.
"All the major components are present to justify expectations of demand outpacing the relatively strong performance recorded in 2010," Grubb & Ellis said in its report.
The overall logistics vacancy rate will fall to about 11.5 percent by year end from 12.8 percent at the end of last year and 13.8 percent at the end of 2009, the report said.
Supply will remain constrained, with less than 7 million square feet of new logistics buildings under construction. "Additional projects will be announced during the year, but 2011 will be the year with the least amount of new deliveries on record," the report said.
Rental rates are expected to take longer to recover. "Net effective rents could see an 8 to 10 percent increase by the end of 2011 but net asking rents will remain relatively flat over the year," the report said.
Grubb & Ellis said all key indicators for logistics demand turned upward last year. Those indicators included industrial production, retail sales, the Cass Freight Index, containerized cargo imports, intermodal volumes and truckload shipments.
Almost 20 million square feet of logistics space was absorbed during the second half of 2010, including 15.9 million square feet in the fourth quarter, "a quarterly performance that would not have been discouraging even during the market's peak activity between 2005 and 2007," the report said.
The recovery was broad-based. Nineteen of the 28 logistics markets that Grubb & Ellis tracks showed positive absorption of space. One was unchanged and of the eight markets with negative net absorption, the only one of "meaningful magnitude" was Sacramento, Calif., at minus 2.2 percent.
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