Analysis by Barbara Byrne Denham
TRADE WAR STILL AFFECTING INDUSTRIAL
The industrial sector decelerated a bit in the fourth quarter as the trade war continued to hurt the sector. Net absorption in warehouse /distribution fell from 18.0 million SF to 14.0 million SF in the fourth quarter. This is was above the average in the first two quarters of 10.9 million SF, but far short of the average quarterly absorption figure of 2018, 26.2 million SF. In flex/R&D, net absorption of 1.4 million SF was in line with last quarter’s figure and above the first two quarters’ average of 1.0 million SF, and the vacancy rate declined by 0.1% for the second consecutive quarter due to lower construction.
Industrial Effective Rent Growth
Source: Moody’s Analytics REIS
Construction in both warehouse/distribution and flex/R&D was lower in the fourth quarter. The balance in supply and demand for warehouse/distribution kept the vacancy rate steady at 9.9%, though this rate is up from 9.4% a year ago. In flex/R&D, the vacancy rate declined to 9.6% at year-end from 9.7% in the third quarter and is down 20 basis points from 9.8% a year ago as absorption exceeded very low supply growth…
Barbara Byrne Denham is a Senior Economist in the research and economics department at REIS, the team responsible for the firm’s market forecasting, valuation, and portfolio analytics services. Throughout her 20-year career, Barbara has written a number of white papers on the commercial real estate market.