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Industrial Occupancy Rates, Rents Healthy Coming Out Of 2015, BOMA Reports

Bob McClure EDITED

Industrial is one of the strongest sectors in commercial real estate right now, and a recent BOMA report reveals that the industry’s momentum has continued from strong rents and occupancy rates reported last year.

In its second annual Industrial Experience Exchange Report (EER), BOMA tracked data from roughly 3,900 industrial buildings that accounted for more than 645M SF. The report showed average occupancy rates of 96.61% and rents of $5.35/SF last year.

“The findings this year were very positive. The average rate has been going up since the recession in a continuous climb, near 90%, so that shows the strength of the markets,” BOMA VP Bob McClure (pictured, surrounded by staff) tells Bisnow.“ [Industrial’s] total rental income is very strong per SF, as is the base rent."

Industrial Occupancy Rates, Rents Healthy Coming Out Of 2015, BOMA Reports

One contributing factor to the success of the industry is the growth of e-commerce. As e-commerce momentum continues to build in the retail sector, industrial will benefit. With more brick-and-mortar businesses building an online presence, the need for warehouses and distribution centers continues to grow.

“One of the things affecting this is all the e-commerce, like Amazon and many other companies that have to have warehouses,” Bob says. “It's just a sector that is going very strong right now.” 

Last month, Cushman & Wakefield released a report detailing how the industrial market fared the first half of this year. It revealed that US industrial markets broke net absorption records in Q2 with their 25th consecutive quarter of net occupancy growth, up 6% to 70M SF of tenant-occupied space compared to Q2 '15.

Nationally, vacancy rates declined in Q2, falling 30 bps to 5.8% from the prior year. Cushman & Wakefield said the industry’s chasing its lowest vacancy levels of the past 30 years. 

“I think there are several big drivers, the first being the phenomenal impact e-commerce has had in relation to fulfillment. It’s really driving demand, and in essence there’s a new user of industrial space,” Cushman & Wakefield VP Jason Tolliver told Bisnow.