NEW YORK CITY-Industrial leasing activity across the country went from strength to strength in 2011, showing upticks in major markets and a decline in the overall vacancy rate, new research from Cushman & Wakefield shows. More than 417 million square feet of US industrial leasing was completed during the year, a 20% increase from the 345 million square feet signed in 2010 – a sign of improving fundamentals from coast-to-coast in 2012.

“It’s pretty dramatic,” says Jim Dieter, SIOR, who heads the national industrial brokerage platform at C&W, in an interview with GlobeSt.com. Dieter visited the company's Manhattan headquarters at 1290 Avenue of the Americas last week to discuss the firm’s latest fourth quarter data—and tells GlobeSt.com that the national industrial vacancy rate has dipped from 10.8% to 10%, nearly a 1% drop.

“That doesn’t sound like much, but the US size of its industrial market is around 12 billion square feet,” he says. “When you have a drop in vacancy rates of almost 1%, you can see that’s pretty dramatic.”

Several factors have contributed to the gains, ranging from increased GDP performance, improved job growth and increased manufacturing output. As a result, demand has remained high on the east and west coasts, as well as in the Midwest's inland trade hubs.

Out of the large tier-one industrial markets, Southern California topped the market with 36.7 million square feet. In second place, Chicago’s dominance remained unchallenged, with a total of 30.3 million square feet. In third, Northern/Central New Jersey saw 23 million square feet of leases – a whopping 83% increase from 2010.

“Our research group tells us that is the highest volume of pre-recession levels that we’ve had, Dieter says, noting that Northern New Jersey’s industrial vacancy rate went from a little over 11% down to 9.5%, even in a year with a toll increase on state highways. “There’s some good positive fundamentals happening in the industrial landscape.”

Properties driving the market around the New York/New Jersey harbor area are primarily big-box distribution buildings, which are being leased up fast—and could command higher rents as supply dwindles, Dieter explains.

“Most of that activity started in the second-half of 2010 and all throughout 2011, and there’s becoming an acute shortage of available supply, including in New Jersey, of the big box space,” he says. “Because of a short supply, it is the most likely product type that will see rent increases for that product type. Demand is actually outstripping supply in almost all of the tier-one markets, including New Jersey. We are going to see in 2012 the likelihood of slight rent increases in the big box spaces.”

Other factors driving the local industrial market include several improvements being made to regional ports, bridges and tunnels. One project spurring much industrial activity is the $1 billion Bayonne Bridge reconstruction, which is linked to the Panama Canal expansion along both the Gulf and East Coasts.

At the same time, the Tri-State region—and certainly the state of New Jersey—is on constant, competitive mode with Eastern and Central Pennsylvania, Dieter says. “Both markets are doing very well, and both are showing an increase of activity,” he explains, but expects Northern New Jersey to stay on top. “As long as you have the critical mass of population in the Tri-State region, as long as you have the vibrant Newark/New York ports, as long you have the rail system and trucking system there and access to the entire eastern Seaboard, the Tri-State region will do just fine.”

As a whole, Dieter says manufacturing output has seen improvements month-over-month for the last 25 months across America. “It is such a key component not only to the US economy, but the industrial landscape,” he says. “Manufacturing supports our export business, and manufacturing internally means that if our industrial output is on the rise, that means there is a demand. If there is a demand for that product to be manufactured, that means we must be going in the right direction.”

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