The NAIOP Research Foundation has released its Industrial Space Demand Forecast for the fourth quarter of 2011, in which the association predicts a positive increase in demand, but still below historically normal rates.
“Sluggish industrial demand signifies that the industry, and this property sector in particular, are reliant on much-needed growth in the national economy,” said Thomas J. Bisacquino, NAIOP president and CEO, in a release. “Although minimal, the positive growth industrial has experienced during the past several quarters is a small sign of optimism. It is evident that the industry won’t return to more normal rates of growth until the overall economy stabilizes and businesses begin to spend again.”
The 3Q2011 marks the fifth consecutive quarter of positive growth in industrial demand, following seven quarters of deep contractions, according to NAIOP.
The Industrial Space Demand Forecast analyzes important economic factors and net absorption data to predict future demand for industrial real estate. Issued quarterly, the NAIOP Industrial Space Demand Forecast is based on Purchasing Manager Index (PMI) data provided by the Institute of Supply Management (ISM), Index of Manufacturing Output (IMO) data provided by the Federal Reserve, and net absorption data provided by CBRE Econometric Advisors.
According to the data:
- The current annualized rate of growth (3Q2011) was 1.16 percent – in line with the forecast of 1.0 percent and consistent with the readings during the past several quarters that have ranged from 1-1.26 percent.
- 3Q2011 growth was on the low end of historical norms that range from 1-2 percent per year. This finding is consistent with readings of the overall economy that has seen GDP growth that is positive but below long-term averages.
- Looking forward (see Table 2), all of the demand drivers have trended downward in sync with the somewhat stagnate U.S. economy. While the current conditions remain in the normal category, the direction and magnitude of the slowdown is troubling looking ahead to future quarters. Strong demand growth isn’t expected until 2012, contingent upon the overall economy resuming more normalized growth.
- Therefore, the demand for industrial space will grow at an annualized rate of 1.09 percent in 4Q2011, which is at the low end of the normal range. Increasing rates of growth are expected to begin to occur into 2012, barring exogenous shocks.
This is the fourth forecast for industrial space demand, part of ongoing data and analysis by Dr. Randy Anderson, University of Central Florida, and Dr. Hany Guirguis, Manhattan College.