The industrial real estate market is one quarter away from reabsorbing the space that went vacant during the 2008-2009 downturn, as about 86 percent of the space made vacant during the recession has been filled, according to Grubb & Ellis report.
Of the 153 million square feet of warehouse and distribution space vacated during recession, about 132 million square feet has been reabsorbed in the last six quarters, according the Grubb & Ellis Industrial Market Trends report for the third quarter.
“Given the severity of the decline, the current recovery is progressing slightly ahead of the one that followed the 2001 recession,” the report stated.
California’s Inland Empire, which feeds off of the Los Angeles-Long Beach port complex, led the way with big box tenants absorbing an additional 4.1 million square feet. This one market accounts for less than 4 percent of the total national stock, but it contributed 20 percent of the total national demand in 2011, Grubb & Ellis stated.
Generally, most major distribution markets saw strong demand, especially for larger properties. Chicago, Dallas/Fort Worth, Northern/Central New Jersey and Phoenix were the leading markets. Smaller markets did not perform as well.
Net asking rents rose at an annualized rate of 0.6 percent, pulled down by the smaller markets where tenants have been making lateral moves in search of lower rents. However, focusing on just the 750,000-plus square-foot properties, rents during the third quarter increased 21 percent.
Grubb & Ellis sees 2012 as being the year of speculative new construction. It identified 16 markets where speculative new construction is already occurring or is set to commence.
However, in order to support the increase in new construction, demand must accelerate if vacancy rates are to continue falling at the rates seen since the second quarter of 2010, the report stated.