The North American industrial real estate market is in a virtuous cycle that will last at least another three years, according to a forecast issued today by global real estate firm Cushman & Wakefield.
In its three-year forecast of trends in warehousing and distribution centers, as well as in manufacturing, Cushman said demand for industrial property is being propelled by businesses that have "gone on the offensive," led by a surge in hiring. The U.S. economy is expected to create 3 million jobs this year, according to the firm.
The U.S. warehouse vacancy rate currently stands at 6.7 percent and is in its 19th consecutive quarter of decline, the firm said. By the end of 2015, the warehouse vacancy rate will drop to 6.3 percent, despite a considerable amount of new construction. The continued decline is a sign of increasing tenant demand, especially for e-commerce.
In a reflection of rail intermodal's growing prominence, markets like Chicago, Atlanta and Dallas/Fort Worth are leading the way in rent growth, square-foot absorption and construction, Cushman said. The rising tide is also benefitting second-tier markets like Indianapolis and Kansas City, the firm said.
Commercial activity in Canada and Mexico also will remain strong, the report said. In Toronto, about 7.3 million square feet of industrial space—mostly of the big-box retail variety—was under construction at the end of the third quarter, according to the report. The oil-producing market of Calgary is seeing considerable speculative development, mostly in the logistics segment, the report said.
Industrial vacancies in Mexico City are in the 5-percent range, with e-commerce demands driving much speculative construction of large-scale buildings, Cushman said. The Monterrey market is also showing growth, especially in the development of environmentally friendly industrial parks, the firm said.