And even though the auto sector picked up earlier than housing and “may be slowing down a bit,” when it comes to the reconstruction of the supply chain due to e-commerce, “we're still in the early innings.”

Developers and users began to really focus on this reconstruction only about five years ago, Caton adds. Many are still in the innovation stage and experimenting with new models. At some point, companies will need to decide whether to use a 3PL, or perhaps rent out space in a massive class A facility along with an ecosystem of smaller distribution centers that handle same-day delivery in dense urban areas. “If you're a retailer, a successful online strategy could mean 30% growth,” and companies will need to “think about their supply chain from end-to-end.”

But unlike the last boom in 2006-07, all of this new activity has not led to a national glut of new supply. “One of the hallmarks of this cycle has been the discipline of the development community,” Caton says. He points to Chicago, where developers have about 15 million square feet under construction, and one-third is already spoken for.

In a market this mature, however, there are also going to be hiccups. “Some markets are starting to get too much supply,” he says. Developers in Indianapolis, for example, completed millions of square feet in 2015, and even though that city has become a major distribution center, “the market kind of stalled.” Still, “in the last year or so, it has been one of the most improved markets in the US.”

And Prologis just released its latest industrial business indicator, which predicted that “net absorption will move in tandem with completions as new supply is rapidly leased up in most markets. As a result, the US vacancy rate should remain near its historic low of 4.6%.”

Prologis

CHICAGO—The US industrial market is on a historic run. And experts say the factors responsible for the present era of expansion have combined in a powerful way that could sustain growth for several years.

The consumption of goods such as food and beverages has steadily increased due to population growth, for example, and economic expansion on top of that has created more demand for goods like housing materials and auto parts. But one more accelerant added to the mix has been the need to reconstruct corporate supply chains due to changes brought about by e-commerce.

“Right now, all three of these sectors are expanding,” Chris Caton, head of research for Prologis, one of the nation's largest developers and owners, tells GlobeSt.com. Users have absorbed about one billion square feet of space in just four years, much of it devoted to the warehousing and distribution of goods.

But the industrial economy still has the potential to expand even further. Caton points out that the housing sector, which requires both the production and distribution of a massive amount of goods, still has not fully recovered from the historic plunge that began about a decade ago. According to census data, housing starts have been rising since 2009, but at about 1.2 million per month are currently below the historic norm. “We think 1.5 million is sustainable.”

And even though the auto sector picked up earlier than housing and “may be slowing down a bit,” when it comes to the reconstruction of the supply chain due to e-commerce, “we're still in the early innings.”

Developers and users began to really focus on this reconstruction only about five years ago, Caton adds. Many are still in the innovation stage and experimenting with new models. At some point, companies will need to decide whether to use a 3PL, or perhaps rent out space in a massive class A facility along with an ecosystem of smaller distribution centers that handle same-day delivery in dense urban areas. “If you're a retailer, a successful online strategy could mean 30% growth,” and companies will need to “think about their supply chain from end-to-end.”

But unlike the last boom in 2006-07, all of this new activity has not led to a national glut of new supply. “One of the hallmarks of this cycle has been the discipline of the development community,” Caton says. He points to Chicago, where developers have about 15 million square feet under construction, and one-third is already spoken for.

In a market this mature, however, there are also going to be hiccups. “Some markets are starting to get too much supply,” he says. Developers in Indianapolis, for example, completed millions of square feet in 2015, and even though that city has become a major distribution center, “the market kind of stalled.” Still, “in the last year or so, it has been one of the most improved markets in the US.”

And Prologis just released its latest industrial business indicator, which predicted that “net absorption will move in tandem with completions as new supply is rapidly leased up in most markets. As a result, the US vacancy rate should remain near its historic low of 4.6%.”