Economy Watch: Industrial Market Stays Tight, Despite New Product
- May 12, 2018
The 12 billion-square-foot U.S. industrial market ended the first quarter of 2018 with a 5 percent vacancy rate overall, even though a significant amount of new construction was delivered, reports Avison Young in its Spring 2018 Industrial Market Report for North America and Europe. Although the vacancy rate represents a decrease of 30 basis points year-over-year, the rate of decline has slowed as the overall average reached low single digits, the firm reported on Thursday.
E-commerce and last-mile distribution hubs near population centers, data centers and biotech facilities continue to be prevailing demand generators, while marijuana legalization has had a meaningful impact on industrial vacancy in a handful of markets, the report noted.
Developers are seeking to meet strong tenant demand by creating the most efficient product possible through innovation and technology. One innovation of note: Replicating a model from elsewhere in the world, Prologis recently developed the country’s first multi-level distribution warehouse on the West Coast.
Innovative design may be the answer to land constraints in primary markets across the U.S., as more multi-level facilities are in the works in major East Coast markets such as New York, Avison Young said. Obsolete or vacant properties of all types are being repurposed for industrial uses – including self-storage, which has been popping up in office-dense locations.
Supply-chain logistics, technology and the availability of affordable power – in the form of electricity or other energy sources – will be key components in the long-term health of the industrial sector, the report added.