Warehouse/Distribution Top & Bottom Markets: Effective Revenue Growth
While the industrial sector slowed slightly in the first half of 2019, weighed down by trade wars and so on, growth is still steady. The U.S. aggregate YoY effective revenue was 2.4% this quarter, down from 2.5% last quarter and 2.9% two quarters ago. The top five metros had solid growth rates over 4%, and Richmond had a growth rate of over 5%. San Antonio was again among the bottom five markets this quarter, with an aggregate growth rate of -1.6%. San Antonio and Nashville were the only markets in the bottom five to have negative aggregate growth rates, just like last quarter.
Effective Revenue Per SqFt, Percent Change 2018Q2 – 2019Q2
Source: Reis, Real Estate Solutions by Moody’s Analytics
The chart above ranks markets by their year-over-year effective revenue growth, which is calculated as the annual change of effective rent multiplied by the occupancy rate. On the left side of the chart, we have the five markets with the highest effective revenue growth, and on the right side, we have the five markets with the lowest effective revenue growth. The navy blue bars represent the metro-level growth rates, and the gray and teal bars represent the submarkets with the highest and lowest growth rates in the metro. The underlying shapes, which can be interpreted the same way as a histogram, represent the growth rate distribution for all properties in the metro. To remove outliers and create a useful visualization, we use data from the 10th to the 90th percentile for the property level distribution.
Industrial properties have the widest range of performance by far. The best-performing properties on our chart this quarter were in Fort Worth. In the sample used to create the chart, there were about 30 properties that had an effective revenue growth rate of 30% or higher in Fort Worth. As we’ve come to see with the industrial sector, even some metros that perform badly “on average” have some of the best-performing properties. The obvious example in this quarter’s chart is Nashville.
Analysis by Shan Ahmed. Ahmed is an Associate in the Economics Department at Reis. He is responsible for the firm’s custom client projects and real estate portfolio analytics services. Shan holds a bachelors degree in Economics from The University of Texas at Austin
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