“The next cycle for the industrial market could prove to be interesting as data centers, technology and distribution help drive vacancy to new lows and functionally obsolete buildings are converted to other uses,' says Webb. “Lack of available supply, the emphasis on the last mile in the supply chain, higher clear heights and land constraints are widespread and common issues.”

CHICAGO—Demonstrating the validity of the adage “a rising tide lifts all boats,” the industrial sector continues to go from strength to strength, a statement that includes markets where growth has slowed in other sectors. “Certainly, we've seen no slowdown in leasing activity since this time last year, and market indicators continued to improve broadly across the US,” says Earl Webb, president, US at Avison Young. “Even markets, such as Houston, that were cause for concern in 2016 because of volatile energy prices reported occupancy gains, robust deliveries and controlled new construction.”

Industrial vacancies across the US markets tracked by AY averaged 5.3% as of March 31, down from 5.9% a year earlier. In more than a third of the 41 markets on the firm's radar, vacancies at the end of the first quarter were below historical averages, in particular San Mateo, CA (1.7%), Orange County, CA (2%) and Miami (2.8%). And all but two markets saw year-over-year triple-net asking rent increases, with the US on the whole averaging $6.97 per square foot, up 44 cents from the year-ago period.

Although most US markets have seen only modest levels of new product coming on line over the past year, there were notable exceptions. Dallas saw 25.5 million square feet of deliveries during the trailing 12 months, an increase of nine million square feet from the market's new construction during the period that ended March 31, '16.

Los Angeles wasn't far behind with 24.7 million square feet coming on line, but the pace of deliveries was virtually the same as in the previous 12-month period. Atlanta followed with 20.3 million square feet of completions, up 3.8 million square feet from the April 2015-March '16 period. Next up were Chicago (20 million square feet, up 1.2 million square feet) and Houston (13.6 million, up 3.6 million).

“The next cycle for the industrial market could prove to be interesting as data centers, technology and distribution help drive vacancy to new lows and functionally obsolete buildings are converted to other uses,' says Webb. “Lack of available supply, the emphasis on the last mile in the supply chain, higher clear heights and land constraints are widespread and common issues.”