Vacancy Crests 5.0% as Occupiers Hold Out for New Developments
Demand for industrial property continues to outstrip developers’ capacity to deliver new space, according to Transwestern’s latest national report on the sector. Occupiers soaked up a net 41.2 million square feet in the third quarter of 2019, a 23% decrease from 53.2 million square feet absorbed in the previous quarter and less than half the pace in third quarter 2018.
Meanwhile, the national vacancy rate ticked up for a third consecutive quarter to reach 5.0%. New industrial projects are leasing quickly and often before construction is complete, with vacancy concentrated in older properties.
“Much of the older-generation industrial space vacated as users have upgraded to newly constructed properties remains unleased,” said Matt Dolly, Research Director in New Jersey. “While that results in what appears to be increased availability at the national level, the scarcity of functional space in prime locations is slowing absorption. Users are committing to lease newer, more efficient properties even before construction has started rather than take an aging alternative in a less desirable location.”
Developers are racing to answer unmet demand and had 427.5 million square feet of construction underway at the end of the quarter. That’s up from 407 million square feet in the second quarter, also a record. The volume of new product entering the market helped raise average asking rent to $6.42 per square foot.
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Transwestern Commercial Services (TCS) is a privately held real estate firm of collaborative entrepreneurs who deliver a higher level of personalized service and innovative client solutions. Applying a consultative approach to Agency Leasing, Asset Services, Occupier Solutions, Capital Markets and Research, our fully integrated global organization adds value for investors, owners and occupiers of all commercial property types. We leverage market insight and operational expertise from across the Transwestern enterprise, which includes firms specializing in development and real estate investment management. TCS has 34 U.S. offices and assists clients from more than 200 offices in 37 countries through strategic alliances with France-based BNP Paribas Real Estate and Canada-based Devencore. Experience Extraordinary at transwestern.com and @Transwestern.
ABOUT TRANSWESTERN
The Transwestern enterprise comprises diversified real estate services, investment management and development companies. The privately held, fully integrated organization leverages competencies in office, industrial, retail, multifamily and healthcare to add value for investors, owners and occupiers of real estate.
