u.s. market | industrial
TRANSCRIPT
Second Quarter 2021
COMMERCIAL REAL ESTATE
U.S. MARKET | INDUSTRIAL
U . S . M A R K E T | I N D U S T R I A L | Q 2 2 0 2 1
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
U.S. TRENDLINES
5-Year Trend Current Quarter
VACANCY
U.S. HIGHLIGHTS
5.2%Lowest level since pandemic began
ECONOMY
• Following disappointing April and May figures, job growth exceeded expectations in June, though the unemployment rate was higher than anticipated.
• Industrial-using employment was virtually unchanged as supply chain challenges adversely affected manufacturing and construction.
• E-commerce’s share of overall retail sales cooled as brick-and-mortar stores reopened.
INDUSTRIAL MARKET
• Q2 marked the third consecutive quarter with over 100 MSF of positive net absorption, which hasn’t occurred since the first three quarters of 2018.
• Occupancy levels increased in all but one market in the past 12 months and 40 of 44 markets during Q2.
• The overall vacancy rate improved in consecutive quarters for the first time in three years.
• New inventory delivered to the market was at its lowest level in more than two years.
• The volume of product under construction is 30% higher YoY and double that of year-end 2015.
• After slowing during much of 2020, rent growth acceleration has returned to pre-pandemic levels.
LOOKING AHEAD
• Most brick & mortar retailers are investing more in e-commerce than on the in-store experience.
• Food/beverage will grow its share of e-commerce.
• As America’s ports continued to report record cargo volumes, the supply chain is still congested, and is anticipated to remain so well into 2022.
• Increased warehouse pricing, coupled with supply chain issues, could create opportunities for other transportation hubs in secondary logistics markets.
VACANCY VS ASKING RENT
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12.0%
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Average Asking NNN Rent (PSF) Vacancy
NET ABSORPTION (MILLION SF)
UNDER CONSTRUCTION (MILLION SF)3 Yr Qrtly Avg 456.3 MSF 5 Yr Qrtly Avg 413.8 MSF
3 Yr Qtrly Avg 81.3 MSF5 Yr Qtrly Avg 93.3 MSF
NET ABSORPTION 102.2 MSFDemand continued to accelerate
ASKING RENT$6.96 PSF38th consecutive quarterly increase
UNDER CONSTRUCTION
573.7 MSFDevelopers ramp up to record levels
YTD
UNEMPLOYMENT RATE
5.9%Job gains in nearly every sector
RETAIL SALES GROWTH
-0.3%Consumers returned to brick & mortar retail
U.S. HISTORICAL
O V E R V I E W
YTD
U . S . M A R K E T | I N D U S T R I A L | Q 2 2 0 2 1
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NET ABSORPTIONQ2 2021 Net Absorption
VACANCY/CONSTRUCTION ASKING RENTS
Trailing 4-Qtr Net Absorption Q2 2021 Under Construction
Q2 2021 Vacancy Rate
Year-Over-Year Rent Growth
Q2 2021 Asking Rate NNN
0 2 4 6 8 10 12
Indianapolis
Philadelphia
Lehigh Valley
New Jersey
Phoenix
Los Angeles
Atlanta
Chicago
Inland Empire
Dallas-Fort Worth
0 5 10 15 20 25 30 35
Lehigh Valley
Philadelphia
Los Angeles
New Jersey
Houston
Phoenix
Inland Empire
Chicago
Dallas-Fort Worth
Atlanta
$0 $5 $10 $15 $20
U.S. Average
Miami
Northern Virginia
Seattle
East Bay-Oakland
District of Columbia
Long Island
San Jose-Silicon Valley
Los Angeles
Orange County
San Diego
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0.0% 5.0% 10.0% 15.0% 20.0%
U.S. Average
Cleveland
Northern Virginia
New Jersey
Tampa
Baltimore
Lehigh Valley
Nashville
Long Island
Suburban Maryland
Philadelphia
Millions SF
Millions SF PSF
Millions SF
T O P - R A N K E D M A R K E T S B Y I N D I C A T O R S
U . S . M A R K E T | I N D U S T R I A L | Q 2 2 0 2 1
NET ABSORPTION
MARKET EXPANSION: 3 YEAR NET ABSORPTION % STOCK
K E Y P E R F O R M A N C E I N D I C A T O R S
• Positive annual and quarterly net absorption was reported in most markets as industrial space needs continued to grow.
• Further, net absorption accelerated in Q2 for over 60% of tracked markets. This subset experienced higher net absorption in the past quarter than their quarterly average over the past 12 months.
• Here we consider 3-year net absorption as a percent of stock. A higher percentage indicates that a market is more expansionary.
• Markets experiencing the most growth include Savannah, Lehigh Valley, Las Vegas, Inland Empire, Charleston, and Phoenix.
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T12 Month Net Absorption T3 Month Net Absorption Quarterly Avg T12 Month Net Absorption
U . S . M A R K E T | I N D U S T R I A L | Q 2 2 0 2 1
RENTAL RATES (NNN)
RENTAL RATE CHANGE
K E Y P E R F O R M A N C E I N D I C A T O R S
• Markets with the highest rental rates were located on the West coast and near Washington, D.C., and New York.
• Some Midwest markets with low rental rates saw relatively high rent growth over the past year, including Cleveland, Chicago, and Columbus.
• More than half of the tracked markets saw rental growth for the year surpass 5%, with all but three experiencing increases over the past 12 months.
• While a few of the markets with low or negative rental-rate changes may be reacting to recent strong supply (e.g., Raleigh-Durham, Savannah), others may be adjusting to low or negative net absorption (e.g., Washington, D.C., Minneapolis).
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Rental Rate T12 Percent Change Deliveries T12 as a Percent of Stock
U . S . M A R K E T | I N D U S T R I A L | Q 2 2 0 2 1
CONSTRUCTION PIPELINE
AVAILABILITY
K E Y P E R F O R M A N C E I N D I C A T O R S
• Many coastal markets where the busiest U.S. container ports are located reported the lowest availability as a percent of stock.
• Markets seeing the largest increases in availability include Savannah, Kansas City, and Seattle – all of which also have higher than average overall availability as a percent of stock as well. Those seeing the largest decreases include St. Louis, Austin, San Antonio, and Los Angeles.
• Under construction stock is indicative of future expansion.
• Savannah and Austin are growing relatively quickly with under construction stock exceeding 12%.
• Growth in the Sun Belt is evidenced here, as Savannah, Austin, Phoenix, San Antonio, Charleston, and Charlotte have seen the most acceleration of under construction SF as a percent of stock over the past year.
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U . S . M A R K E T | I N D U S T R I A L | Q 2 2 0 2 1
MarketInventory
Square FeetOverall
Vacancy Rate Direct
Vacancy RateNet
Absorption12-Month
Net AbsorptionAsking Rent
NNNAnnual Rent
ChangeUnder
Construction
Atlanta 704,864,902 4.4% 4.2% 7,515,554 31,880,070 $5.52 7.2% 24,011,114
Austin 98,966,853 6.1% 5.6% 1,553,765 4,856,877 $11.31 2.0% 12,983,907
Baltimore 228,514,124 8.3% 8.0% 332,168 4,757,342 $7.27 12.5% 4,353,678
Boston 329,865,884 4.6% 4.5% 1,733,599 1,990,550 $10.64 8.0% 3,637,669
Charleston 78,810,972 5.6% 5.2% 731,431 2,327,568 $6.00 4.5% 4,118,922
Charlotte 322,315,596 7.2% 6.8% (69,612) 4,060,160 $5.36 2.3% 12,632,380
Chicago 1,261,544,582 5.9% 5.6% 9,198,150 27,003,030 $6.46 8.6% 20,749,058
Cincinnati 321,188,208 5.7% 5.5% (136,281) 4,623,268 $4.48 3.9% 5,326,250
Cleveland 329,215,184 5.0% 4.8% (78,294) 1,694,345 $4.38 10.1% 1,133,500
Columbus 303,786,062 5.9% 5.6% 690,150 8,574,043 $4.40 7.1% 6,230,052
Dallas-Fort Worth 947,097,974 6.4% 6.0% 10,430,752 28,619,291 $5.78 6.9% 32,962,806
Denver 238,529,655 7.4% 6.8% 566,866 832,607 $9.28 5.5% 6,285,169
Detroit 561,042,775 4.9% 4.6% 540,069 1,490,540 $6.39 2.6% 7,035,475
District of Columbia 9,736,855 4.6% 4.6% 112,392 134,350 $13.35 -4.3% 0
East Bay-Oakland 195,932,682 6.3% 5.6% 32,894 1,701,671 $13.01 8.3% 0
Houston 644,130,900 9.1% 8.8% 3,412,043 12,585,673 $7.68 2.4% 15,587,937
Greensboro 273,332,165 3.3% 3.2% 186,791 2,559,222 $4.23 6.3% 3,793,776
Indianapolis 343,117,377 5.9% 5.4% 4,070,229 6,851,150 $4.34 3.8% 13,635,667
Inland Empire 654,056,308 3.0% 2.8% 9,972,165 24,617,470 $9.51 7.2% 26,644,859
Jacksonville 132,903,394 4.7% 4.5% 1,077,058 2,178,329 $5.80 3.0% 3,266,038
Kansas City 296,530,432 5.5% 5.3% (721,842) 4,697,407 $4.67 0.2% 11,095,268
Las Vegas 138,334,480 4.4% 4.1% 3,951,534 8,067,956 $9.45 7.3% 6,298,517
M A R K E T S U M M A R I E S
U . S . M A R K E T | I N D U S T R I A L | Q 2 2 0 2 1M A R K E T S U M M A R I E S
MarketInventory
Square FeetOverall
Vacancy Rate Direct
Vacancy RateNet
Absorption12-Month
Net AbsorptionAsking Rent
NNNAnnual Rent
ChangeUnder
Construction
Lehigh Valley 141,039,681 5.1% 4.7% 4,475,189 8,602,478 $6.86 13.0% 8,833,651
Long Island 154,201,542 4.4% 4.1% 625,423 (236,613) $13.85 14.2% 1,118,412
Los Angeles 846,394,501 2.3% 2.1% 6,558,529 10,362,847 $14.41 9.7% 3,594,580
Miami 232,798,777 4.0% 3.8% 1,805,644 6,657,635 $11.54 9.7% 4,471,180
Milwaukee 242,792,344 4.7% 4.6% 767,629 2,432,352 $4.55 1.8% 1,608,295
Minneapolis 378,152,004 4.0% 3.7% 26,992 1,488,161 $5.62 -1.4% 4,358,745
Nashville 223,874,629 3.7% 3.1% 856,549 6,030,053 $6.89 14.1% 13,196,262
New Jersey 744,299,018 3.3% 3.0% 4,626,136 11,896,114 $9.85 11.7% 16,137,552
Northern Virginia 111,607,278 5.0% 4.7% 1,095,907 4,829,260 $11.97 10.2% 1,952,465
Orange County 273,354,015 3.0% 2.5% 1,106,426 2,351,518 $14.46 8.6% 391,203
Orlando 167,097,956 5.0% 4.7% 1,146,767 5,852,631 $7.66 9.4% 2,753,264
Philadelphia 531,340,472 4.6% 4.5% 4,111,807 9,911,255 $7.88 16.4% 20,467,343
Phoenix 353,036,428 6.1% 5.9% 5,814,504 22,114,343 $7.93 4.9% 23,532,863
Raleigh-Durham 124,281,930 3.5% 3.3% 1,675,298 5,301,116 $8.36 1.8% 4,065,411
San Antonio 116,579,281 6.1% 5.9% 524,216 4,376,453 $6.06 2.0% 7,448,358
San Diego 176,827,382 5.0% 4.6% 1,458,244 3,380,452 $16.69 3.7% 5,358,188
San Jose-Silicon Valley 82,957,183 3.8% 3.4% 172,621 216,366 $14.30 3.9% 0
Savannah 74,413,721 8.8% 7.9% 1,171,403 3,938,167 $4.88 -3.4% 10,780,508
Seattle 308,560,910 5.6% 5.1% 284,327 2,556,103 $12.24 8.7% 10,607,148
St. Louis 298,674,988 4.4% 4.0% 2,267,965 6,399,263 $4.68 3.8% 1,052,300
Suburban Maryland 105,255,098 6.5% 6.2% 98,121 420,420 $11.00 14.6% 3,333,523
Tampa 179,240,706 4.5% 4.3% 1,440,745 3,317,423 $6.89 12.2% 4,471,984
U . S . M A R K E T | I N D U S T R I A L | Q 2 2 0 2 1
RESEARCH METHODOLOGYThe information in this report is a compilation of single and multi-
tenant industrial and flex properties located in select U.S.
metropolitan areas. Government-owned buildings are excluded
from analysis. All rents are reported as triple net.
Copyright © 2021 Transwestern. All rights reserved. No part of this work may be reproduced or distributed to third parties without written permission of the copyright owner. The information contained in this report was gathered by Transwestern from CoStar and other primary and secondary sources believed to be reliable. Transwestern, however, makes no representation concerning the accuracy or completeness of such information and expressly disclaims any responsibility for any inaccuracy contained herein.
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FOR MORE INFORMATION
Matthew DollyResearch Director | Research [email protected] 947 9244
Elizabeth NortonSr. Managing Director | Research [email protected] 775 7026
Laura HaltomManager | Data [email protected] 889 4087