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Industrial Sector Enters Period of Contraction

While office rents are projected to come in flat, industrial should experience growth, report says.

By John McCloud | Updated on February 22, 2008

While a US economic slowdown persisting through Q1 and into Q2 will essentially keep economic rent for office space flat in 2008, industrial rent is projected to climb 2.8%, according to the February edition of CB Richard Ellis Viewpoint. The report defines economic rent as market average rent multiplied by market occupancy rate, which provides a measurement equivalent to the change in gross income for occupied space.

Written by Raymond Torto, the firm’s global chief economist, the report shows industrial economic rent increased 5.7% in ’06 and 3.6% in ’07, indicating the downward trend preceded the recent credit crisis. But despite the trend, indications are the decline will not lead to a repeat of the scenario from early in the century, when economic rents actually declined by 4.4%.

In fact, Torto advises major investors to continue investing but to do so cautiously, with appropriate analysis and assumptions undertaken beforehand. “Real estate is an investor’s market, not a trader’s market, and for long-term investors, opportunities will arise from others’ mispricing or misfortune,” he says.

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