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The amount of new industrial space completed took a healthy jump in the second quarter, but one of the region's wettest springs in recent memory helped delay many plans, and that means the third quarter could be historic.
Fifty projects totaling 17M SF are under construction, and after delivering 4.7M SF in the second quarter, developers now expect to deliver another 10M SF in the third quarter, the most since the second quarter of the boom year of 2016, according to a new report from Colliers International.
Thirty of the buildings under construction, with about 9.1M SF, or 53% of the total, are being built on a speculative basis, the firm said. And of the space now set for third -quarter delivery, about 7M SF is vacant speculative product, and that will likely cause a temporary rise to the market's vacancy rate.
Since the current development cycle began in 2013, developers have delivered 227 speculative projects totaling 61M SF.
Although many worried that would upset the balance between supply and demand, the appetite for new product seems as strong as ever.
As of the end of the second quarter of 2019, 68.2% of this space has been leased, Colliers said.
"This figure has increased each of the past eight quarters, indicating that demand for new speculative warehouse space is outpacing new supply and the market is not being overbuilt," the report said. "Over the final six months of 2019, more than 12M SF of construction starts are expected, with nearly 11M SF being built on a speculative basis."
The second quarter saw solid leasing activity for the market's new spec product, Colliers said. Twenty new leases were completed for spec buildings constructed since 2013, although the overall total leased was only 2.3M SF, an indication that it is still difficult to find tenants willing to lease space in the largest spec buildings.
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