By Barbra Murray
It may have been only a slight decrease, but it was one nonetheless—and it was a decrease with meaning. According to a new report from commercial real estate services firm CBRE, the average U.S. industrial availability rate dropped 10 basis points to 7.8 percent in the second quarter, marking the lowest level since the first quarter of 2001.
Times are good in the industrial sector. “The industrial market has been the best performing sector over the past few years due to declining availability rates and strong absorption,” Jeff Havsy, CBRE chief economist for the Americas, told Commercial Property Executive.
The lower industrial availability in the second quarter was the result of two factors: strong demand and a weaker supply. Demand was buoyed by the robust economy, namely job growth, high port traffic and a rise in e-commerce activity and manufacturing markers.
As for the irregular slowdown in industrial property supply, the anticipated delivery of 46.5 million square feet of product turned out to be just 40.2 million square feet. Among the markets that benefited most from the favorable dynamics in the second quarter were Wilmington, Del., and Dayton, Ohio, which recorded declines of 370 and 320 basis points, respectively. Jacksonville, Fla., Cincinnati, Sacramento and Boston all experienced decreases in the 200-basis-point range.
What goes up, must come down
Aside from a minuscule uptick in the first quarter of 2017, industrial availability has been on the downswing for the past 28 quarters. However, the pattern is destined to break.
“We believe availability rates are near the bottom, as the supply pipeline has ramped up with deliveries expected to increase for the remainder of this year and into next,” Havsy said. “Going forward we expect a growing supply pipeline to meet the healthy demand in the market, so the available rate is at a cyclical low.”