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Industrial Recovery Not Expected Till Late 2010

Reports from three brokerages predict further declines into early next year, though at a reduced pace. Stabilization is anticipated by midyear.

By John McCloud | Updated on December 02, 2009

New reports from three leading real estate firms agree it will be several more quarters before US markets see a significant increase in demand for industrial property. At the same time, they also generally agree that the worst of the availability increases is over.

Both the 2010 National Economic and Property Market Forecast from Jones Lang LaSalle and Third Quarter Global Market Review from CB Richard Ellis report the availability rate for investor-owned industrial product rose about 50 basis points to 13.5% in Q3. Colliers International, which does not include properties with scheduled vacancies in its tabulations, calculates the actual vacancy rate at 10.53% in its Q3 report.

According to CBRE, this marks the eighth consecutive quarter of rising availability and the highest availability rate since the company began industrial market data. The brokerage says 56 of the 61 markets it tracks showed increases from the previous quarter. Despite the continued rise in availability, the rate of increase has moderated.

According to JLL, the rate of contraction in property market indicators will continue to moderate throughout next year, though the firm expects competition for active tenants to remain intense, with concessions offering a mix of free rent and tenant improvement packages. Despite the rise in vacancies, rents experienced a smaller decline than might have been predicted, with estimates ranging from Colliers’ figure of 0.9% to JLL’s 1.7%.

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