Historically low vacancy rates and a lack of available space pushed industrial real estate rents to record highs in the second quarter.
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JLL’s Q2 First Look At Industrial report said rents rose to $5.35/SF nationwide, an all-time high.
Industrial markets have been the golden child of commercial real estate for some time as e-commerce and retail players storm the sector in droves to expand their distribution networks by pushing closer to customers.
JLL research did reveal some softening in absorption that lagged behind new supply. For the first time in seven years, net absorption trailed behind new deliveries. This pullback had little to do with weakening demand and was largely attributed to a lack of desirable space and shorter lease transactions.
To better understand the rate at which this space is being gobbled up by retail and e-commerce players, CBRE released a report last month that said more than half of the 167M SF of new warehouse supply under construction has already been pre-leased. This level of activity and pre-lease commitments is a 10-year high for the industry.
“This level [of pre-commitments] suggests two things,” CBRE Americas head of industrial research David Egan told Bisnow. “User demand is still strong even though we're several years into the cycle, and second ... because over half the space built is pre-occupied, the likelihood of a sudden supply-demand imbalance is going to be low.”
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