Logistics Rents Holding Up Despite Rising Vacancies

SANTA ANA, CA–While vacancy rates for logistic properties have risen, asking rents have decreased very little, according to Grubb & Ellis Co.’s first ever logistics research report Logistic Market Trends, Qtr 4 2008. The report, released in late March, says the sector’s vacancy rate rose 260 basis points to 11.7%, but the national average annual asking rental rate fell only 3% from the cyclical peak to $4.16 a square foot, triple net.

“Although market conditions are expected to soften over the next few quarters, when the economy slows, the demand for logistic space still tends to hold up well,” says Bob Bach, the firm’s senior vice president and chief economist. “Manufacturers need to store excess inventories while their sales slow, in turn boosting demand for warehouse space.”

According to the report, the industrial market as a whole is faring better than the logistics subsector. Though the vacancy rate for overall industrial also rose last year, it jumped only 110 basis points and topped out at 8.8%, three points lower than the logistics market. Furthermore, with logistics properties factored out, industrial market vacancies would have risen only 40 basis points and ended the year at 7.6%.