U.S. industrial real estate saw continued growth in the first quarter of 2013, according to data and analysis provided by commercial real estate services firm Jones Lang LaSalle. The U.S. markets the firm tracks experienced mid-to-low vacancy rates and healthy rental numbers, said Craig Meyer, president of JLL Industrial, Americas.
The square footage of new buildings delivered in the first quarter of 2013 was close to triple that of the same quarter in 2012. A total of 14.3 million square feet of new buildings were completed and made ready for occupants in the first quarter, 160.3 percent higher than the 5.5 million square feet delivered in the first quarter of 2012. However, square footage was down 46 percent form the uniquely robust fourth quarter of 2012, which saw 26.4 million square feet completed.
Net absorption (buildings actually being occupied and vacated, irrespective of leases) increased for the fourth consecutive quarter to 37.3 million square feet, up 47.7 percent over the first quarter of 2012. The markets that saw the most positive quarterly net absorption activity in 1Q 2013 were the Inland Empire east of Los Angeles, Chicago, and Atlanta. On a quarterly basis, net absorption dropped 35 percent from the strong fourth quarter of 2012, which is attributed to the high number of buildings completed toward the end of last year. “Of new deliveries, 16 million square feet was pre-leased, much of which contributed to a net absorption boost during the (fourth) quarter,” JLL said. That level was also boosted by speculative construction that had been delivered in the third quarter but was not released until the fourth quarter.
The number of buildings under construction continued to grow in the U.S. market in the first quarter. A total of 62.7 million square feet of industrial space was under construction in the first quarter of 2013, up 50.4 percent year-over-year and 4.6 percent compared to the fourth quarter of 2012. Meyer said the growth in construction to meet demand for industrial space is focused mostly for on buildings under 400,000 square feet, a sign of growth among small businesses leading to demand for smaller buildings. “Class B space is coming back. The broadening economic recovery is spurring more locally-focused businesses to expand. Compared to Class A space, the discount has grown and vacancy rates have nearly equalized,” Meyer said.
The vacancy rate in the U.S. market fell to 8.4 percent in the first quarter of 2013 from 8.7 percent in the fourth quarter of 2012 and 9.1 percent in the same quarter a year ago. The vacancy rate has been steadily falling for over three years. It has improved by 2.2 percentage points since the first quarter of 2010, when it stood at 10.6 percent.