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Specific Metros Lead Industrial’s Recovery

As the sector gains momentum, 14 MSAs are pulling ahead of the pack.

By Hessam Nadji | Updated on May 04, 2011

A broad-based recovery in the nation’s industrial market is under way. Vacancy peaked a year ago, at 13%, and has since dropped to 12.5%, based on preliminary first-quarter estimates. Effective rents have stabilized, and the dollar volume of sales is up 23% so far in 2011 over the same period last year. This increase comes on the heals of volume more than doubling, thanks to a surge in sales of large institutional properties in 2010 from extreme lows in 2009. The average price per square foot for industrial assets has bottomed, with top-tier assets in primary markets registering the only gains over the past year. 

Positive signs are clear when it comes to the economic drivers of the industrial sector, particularly growing U.S. exports, which is helping the manufacturing sector and normalizing global trade. Within the industrial property market, key leading indicators are also encouraging. Occupied space in the past two quarters has grown at a healthy  annualized pace of 0.9%, and that rate appears poised to nearly double over the next two years, assuming that the economy continues to expand at a moderate pace. Construction activity is virtually nonexistent: Space currently under way will expand the existing base by just 0.1% when completed. The industrial vacancy rate will drop between 9% and 9.5% by 2013.  As it does, significant rent growth will take place once again, particularly in key metros.

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