Industrial Sector Improves at a Steady Pace

Industrial real estate fundamentals improved during the fourth quarter at roughly the same pace as the prior three months. Demand for industrial space, while not robust, has been healthy most of the year.

Fourth quarter data from Reis Inc. indicates that occupied stock for the overall industrial market increased by 28.7 million sq. ft., slightly less than the 30.0 million sq. ft. absorbed last quarter, but still the second-highest amount since the recovery began. The warehouse & distribution subsector was the main driver of improvements in fundamentals as demand slackened a bit in the flex and R&D subsector.

Fourth quarter metro figures demonstrate a continued broad based recovery in the overall industrial market; between 40 and 44 out of a total 47 metros covered by Reis exhibited positive absorption and increases in occupancy and effective rent.WAREHOUSE AND DISTRIBUTION

Occupied space for warehouse and distribution centers increased by 25.7 million sq. ft., the largest quarterly figure recorded since the recovery began. This was on par with demand for space exhibited in the third quarter. The vacancy rate shed 30 basis points during the period, mirroring the improvement in occupancy of the past two quarters. At 12.1 percent, vacancy is now down 110 basis points year-over-year and 210 basis points from the cyclical high in 2010.

New construction totaled 9.0 million sq. ft., up 50 percent from the 6.0 million sq. ft. added last quarter. Completions were up in each successive quarter during 2012 and the pace of new construction will continue to rise in 2013.

Asking and effective rents grew 0.2 percent and 0.5 percent, respectively, in line with increases seen in the third quarter. Total asking and effective rent growth for 2012 was 1.1 percent and 1.9 percent, respectively.

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Continued Gains

Source: National Retail Investor