CB pegs current availabilities at 11%, compared to 10.5% in Q1. The category includes not only existing vacancies but also space slated to be vacated or come on line during the subsequent quarter. The brokerage says most of the increase was in the West and Midwest, which registered jumps of 80 basis points and 60 basis points, respectively.
At the metropolitan level, the largest increases occurred in Stamford, CT and Jacksonville, FL. Of the 10 largest markets, Los Angeles had the largest boost in availabilities, primarily due to new construction in the Inland Empire. The brokerage, which reports construction rose from 25.5 million sf in Q1 to 39.7 million sf in Q2, expects the national availability rate will continue to trend upwards for the next nine to 12 months due to the relative softness in the economy.
The NAR puts actual vacancies at about 9.6% and forecasts they will rise to 9.9% in Q4, compared to 9.4% at the end of 2007. It also forecasts annualized rent growth will average 1.2% by year-end, compared to a rate of 3.6% in Q4 '07.
The Washington, DC-based organization calculates net industrial absorption in the 58 markets it tracks at 68.8 million sf for the first half of the year, down from 158.3 million sf in '07. But it points out that most completions have involved built-to-suit projects, resulting in a return to market of many obsolete or nearly obsolete structures. This, it says, means the vacancy rate for viable properties is in fact lower than the official level.
On the investment front, the NAR report says secondary markets have become the most attractive for institutional investors and users. It computes industrial transaction volume during the first four months of the year at $8.5 billion, down from $11.9 billion in same period of '07. Real Capital Analytics in New York City reports $12.14 billion in industrial sales through June. NAR says the Mid-Atlantic and Midwest experienced the sharpest declines in sales.
Speaking of the commercial real estate sector in general, NAR chief economist Lawrence Yun says economic weakness is impacting the overall market. "Although the supply-demand fundamentals are broadly favorable in most commercial real estate markets, vacancy rates are rising modestly and rent gains are slowing," he says. "Slow economic growth is lowering demand for commercial space, mostly in the office and industrial sectors." At the same time, he adds, the commercial market is in much better shape than it was during the '01 recession.
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