Economy Watch: Leasing Activity Booms for Industrial Sector

The U.S. industrial sector continues to heat up, with vacancy rates at a 16-year low, according to a new market report from JLL.

Logicor Industrial PropertyThe U.S. industrial sector has heated up over the last few years (without receiving the attention apartments tend to get), and now, JLL said in its most recent nationwide market report on the market, that conditions are increasingly favorable to industrial landlords. Vacancy is at a 16-year low, for one thing, while demand hasn’t slowed, as industrial and warehousing leasing expands.

Vacancy fell by 20 basis points to 6 percent in the second quarter of 2016, with JLL noting that despite an increase in new spec completions, higher pre-leasing rates have helped keep vacancies stable. Leasing activity for the big-box size segment (more than 500,000 square feet) was largely attributable to e-commerce and traditional retailers, with the two sectors representing nearly half of big-box leasing for the second quarter. The report added that leasing momentum through the end of 2016 will be driven by robust demand for warehouse and distribution space among retailers, e-commerce and transportation companies.

Construction has jumped as well. Total U.S. industrial product under construction expanded by 7.3 percent in second-quarter 2016 to 193.6 million square feet, compared to 180.4 million in the first quarter.

According to the report, the domestic markets with the largest amount of industrial space under construction include Dallas/Fort Worth, at 22.9 million square feet; the Inland Empire at 20.7 million; Chicago at 18.3 million; Atlanta at 15.8 million; Philadelphia/central Pennsylvania at 13 million; and Houston at 11.3 million.