Demand again outstrips new supply, rents tick up further

  • The U.S. industrial & logistics (I&L) sector continued to demonstrate strong fundamentals in Q2, with 58.8 million sq. ft. absorbed versus 48.9 million sq. ft. delivered. The overall market’s availability rate declined 10 basis points from the previous quarter to 7.2%—the lowest level since Q4 2000. This marked the 33rd consecutive quarter of positive net absorption—the longest streak since before 2001.
  • The new supply of 48.9 million sq. ft. that was delivered in Q2 was up 17.8% over the previous quarter and 7.5% over Q2 2017. Deliveries year-to-date are in line with 2017, as new supply comes online at a steady pace. The under-construction pipeline of 260.0 million sq. ft. in Q2 was up 6.5% over the previous quarter, which suggests that new-supply levels should grow over the next year, albeit at a moderate rate.
  • With demand exceeding new supply, net asking rents increased 1.7% in Q2 to $7.11 per sq. ft. —the highest level since CBRE began tracking the metric in 1989. Rents increased 5.5% year-over-year, exceeding the average annual growth rate of 4.1% since 2012.
  • The major drivers of supply-chain demand—consumer spending, business inventories and industrial production—all showed measured growth in Q2. As expected with such strong consumer sentiment, spending rates have hit their highest levels since the 2008 recession. This is especially positive for the I&L market, as consumer spending is highly correlated to demand for warehouse and logistics real estate.