The U.S. industrial market had healthy activity in the first quarter of 2014, according to preliminary data from CBRE Group Inc., with demand for space notably strong in Class A big-box space, driven by e-commerce, logistics and food facility users.
“Industrial fundamentals continue to strengthen on the back of strong economic drivers. With trade, industrial production and private inventories all expanding, early numbers suggest the industrial sector is continuing to recover strongly in Q1 2014,” said Jared Sullivan, CBRE senior economist.
Industrial
• Atlanta had the largest availability rate decrease, with a 100 bps drop to 14.9 percent, driven by demand in the homebuilding, logistics and consumer products sectors.
• Average asking rents grew in nine of the top 12 markets with only one market showing a decline. Seattle led the way with a 3.5 percent quarter-over-quarter rent increase. A shortage of supply coupled with a spike in demand, particularly from mid-sized, light industrial users, drove this rent increase.
• In general, the U.S. industrial market is experiencing a tightening supply, especially in the highly competitive big-box market. As a result, construction activity is increasing, both build-to-suit and speculative.
• Virtually all of the top markets are seeing construction pipeline lines return to pre-recession construction levels. Chicago and Dallas are notable with 9.7 million square feet and 16.0 million square feet currently under construction, respectively. In Chicago, half of the under construction projects are speculative.
Chicago industrial
Chicago’s position as a dominant market in the modern supply chain remains solid. Despite marginal population growth, it is still the clear cut capital of the Midwest and has significant importance as the major American inland port. As the new development cycle gains steam, users and developers will be particularly focused on submarkets that can deliver connectivity to both the supply chain and the end user via access to major transportation infrastructure.
In the previous development cycle, the Far Southwest (I-55 corridor) was the big winner landing a significant share of the new big box development. In this cycle, the Joliet submarket, with its abundant land sites, proximity to major rail intermodals and interstate highways, and easy access to both the city and the growing south and western suburban population is best positioned to capture new development especially in the very large scale big-box market.
The Chicago area industrial market has seen a great deal of activity with a significant amount of construction slated to both begin and be completed within 2014. As of the time of this release, ±8.41 million square feet of industrial projects are under construction in the submarkets that CBRE Chicago’s research team track and 50 percent of these projects are spec.
These numbers contrast with the percentage of spec construction just a year ago where, of the ±2.72 million square feet of projects under construction, none was spec; and to five years ago where there was only 473,591 square feet of projects under construction with 0 percent of it being spec. This increase in spec projects indicates developers are now more confident in the strength of the Chicago industrial market.
Additionally, ±1,39 square feet of industrial projects in those submarkets have been completed in Q1 2014. The submarket surrounding Romeoville, Woodridge and Bolingbrook is projected to deliver ±1.62 million square feet to the market within the year and the submarket surrounding Lake County and Kenosha is projected to deliver ±1.99 million square feet before the close of 2014.
