Los Angeles - April 11, 2018 - The red-hot U.S. industrial market got tighter in the first quarter as availability declined by 6 basis points (bps) to 7.3 percent, marking the 31st consecutive quarter of declining availability, according to a new report from CBRE.
While the changes in availability have been minimal in recent quarters, the year-over-year change amounts to a decline of 20 bps on average across 50 markets tracked by CBRE.
The U.S. market for warehouses, distribution centers and other industrial facilities has seen demand outpace new supply as occupiers - specifically e-commerce companies - race to claim modern distribution facilities. To wit, construction completions totaled 35 million sq. ft. in the first quarter, but demand registered 42 million sq. ft. However, the gap between the two has narrowed over the past year.
"The year-over-year change shows a solid decline of 20 bps," said Timothy H. Savage, Senior Managing Economist at CBRE Econometrics Advisors. "We still believe that as supply catches up with demand, availability's declining trend will initially flatten out and then gradually tick up in the medium term.
"But underlying economic conditions for the industrial sector remain intact, with demand still robust and the supply pipeline strong," he said.
CBRE found that availability declined in 31 markets in the first quarter, increased in 25 and remained unchanged in eight. Availability measures all space available for occupancy by new tenants in the quarter, including truly vacant space and space still occupied but being marketed for use by new users.
Markets that registered the largest declines in occupancy in the first quarter include several secondary and tertiary markets such as Dayton, Ohio (down 300 bps), Sacramento (down 290), Tucson (down 230), Jacksonville (down 220) and Memphis (down 220).
Those that posted the largest increases include Wilmington, Del. (up 520 bps), Louisville (up 210), Austin (up 210), Charlotte (up 140) and Pittsburgh (up 140).