"Demand is far exceeding supply as available buildings are receiving multiple offers, often just days after hitting the market," says Colliers Arnold's director of research Bobby Palta.
"The low interest rates have motivated most available buyers in the market, which has seriously depleted the inventory of buildings available for sale," he says. That situation has caused values to rise, "making it a real seller's market," Palta adds.
On the leasing scene, "landlords are trying to hold the line on asking rents, while free or partial rent concessions are still very prevalent in luring tenants," Palta says. "Broker incentives are getting outrageous, with one reported leasing incentive of a $25,000 Harley Davidson" motorcycle.
Second-quarter statistics show warehouse and distribution space at a 12.3% vacancy level, up from 11.5% in the first quarter. Net absorption was a negative 190,752 sf versus a positive 322,767 sf in the first period. Leasing activity totaled 720,366 sf, down from 1.63 million sf in the first three months. Gross asking rent was $4.76 per sf, unchanged from the first quarter.
In the manufacturing sector, occupancy is at 91.1%, the same level as in the first quarter. Net absorption totaled a negative 14,274 sf compared to a positive 204,078 sf in the first period. Leasing activity was 70,524 sf, down from 259,024 sf in the first three months. Gross asking rent of $5.13 per sf was up from $4.95 per sf.
Flex space vacancies improved to 13.8% from 15% in the first quarter. Net absorption also gained, registering a positive 337,395 sf versus a negative 191,842 sf in the first period. Leasing activity was down, however--520,670 sf against 808,982 sf. Rents, too, were down--$7.98 per sf compared to $8.50 per sf.
"The economic uncertainty kept most businesses on the sidelines this (second) quarter," notes Palta. "This wait-and-see approach explains the marked decrease in leasing activity."
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