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Industrial Vacancy Has Biggest Jump in Two Decades

Grubb & Ellis says US vacancies rose 70 basis points in Q1 to 9.5%. Though asking rents fell only slightly, effective rents took big slip.

By John McCloud | Updated on May 06, 2009

CHICAGO-The US industrial vacancy rate suffered its biggest increase since at least the mid 1980s. According to the Q1 national industrial report from Grubb & Ellis, vacancies rose 70 basis points from January through March, the largest single-quarter gain in the survey’s 22-year history. The rate topped out at 9.5%, the highest level in 4.5 years.

Grubb attributes the change to negative net absorption of 40 million square feet, which marked yet another record, the largest quarterly decline of the decade. What’s more, the volume of leasing activity fell 35% from Q4 and 41% from Q1 ’08, while the average lease term of 44.2 months and size of 23,260 square feet were the lowest readings of the decade.

The report says the warehouse/distribution sector accounted for more than half the negative absorption and 85% of new space delivered in the quarter. As a result, vacancies rose by 110 basis points for that segment. By contrast, the vacancy level for R&D/flex space and general industrial space increased by 70 basis points and 10 basis points, respectively.

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