United States Industrial Outlook

Transcription

Industrial Outlook
United States | Q1 2016
U.S. vacancy (6.2 percent) is on
par with 2000’s record low and
new construction leasing is
increasingly shaping overall
absorption activity. Although
fundamentals remain strong, will
new supply get ahead of leasing
activity in some of the nation’s
construction-heavy markets?
JLL | United States | Industrial Outlook | Q1 2016
2
Table of contents
United States industrial market
4
United States industrial property clock
8
United States industrial weather map
9
United States industrial rankings
10
Local U.S. industrial markets
Atlanta
13
Baltimore
14
Boston
15
Broward
16
Central Valley
17
Charlotte
18
Chicago
19
Cincinnati
20
Cleveland
21
Columbus
22
Dallas / Fort Worth
23
Denver
24
Detroit
25
East Bay / Oakland
26
Greensboro / Winston-Salem
27
Hampton Roads
28
Houston
29
Indianapolis
30
Inland Empire
31
Jacksonville
32
Kansas City
33
Las Vegas
34
Long Island
35
Los Angeles
36
Memphis
37
Miami
38
Milwaukee
39
Minneapolis / St. Paul
40
Nashville
41
Contacts
New Jersey
42
North Bay
43
Orange County
44
Orlando
45
Palm Beach
46
Philadelphia / Central PA
47
Phoenix
48
Pittsburgh
49
Portland
50
Reno / Sparks
51
Richmond
52
Sacramento
53
Salt Lake City
54
San Antonio
55
San Diego
56
San Francisco Mid-Peninsula
57
Seattle-Bellevue
58
South Bay / Silicon Valley
59
St. Louis
60
Tampa Bay
61
Washington, DC
62
64
3
Total United States
Total
stock (s.f.)
Total
vacancy
Total
availability
YTD
net absorption
YTD
const. deliveries
Q1 2016
avg. rent
Y-Y rent
% change
Warehouse & distribution
8,561,524,460
6.4%
9.5%
43,741,222
44,841,997
$4.90
4.9%
Manufacturing
3,524,145,535
5.8%
8.4%
8,413,136
3,618,761
$4.84
9.5%
86,476,831
6.6%
8.4%
170,304
321,212
$8.52
-7.9%
12,172,146,826
6.2%
9.2%
52,324,662
48,781,970
$4.92
5.9%
Type
Special purpose
Totals
Warehouse leasing activity remained strong in most markets as 2015’s
momentum carried over into the first quarter of 2016. Vacancy rates
were extremely tight in many of the nation’s markets. Nationally, there
were around 2,000 blocks of 100,000 square feet and greater warehouse
space available by the end of the quarter, but nearly half of these were in
mid-1980s vintage product or older – which continues to underscore
tenant demand for buildings with more modern features. New
construction, as a result, is on the rise to give tenants a few more quality
space options.
Even though development volumes are increasing, quarterly net
absorption was 7.3 percent higher than new construction in the first
quarter of 2016. This caused the U.S. vacancy rate to drop 10 basis
points from year-end 2015. After 24 consecutive quarters of net
absorption gains, vacancy is now at a 16-year low. While we are in a
“slower growth” economy compared to last year, leading indicators that
favor warehouse space, such as increasing retail sales, home sales and
a low unemployment rate, are healthy. This benefits overall tenant
demand and will help push additional rent growth. With market
fundamentals remaining strong, U.S. absorption is on track to outpace
new construction for the seventh straight year. Yet, soft spots are
emerging in some of the nation’s construction-heavy markets: Vacancies
in some larger size segments could ebb and flow with leasing activity as
new speculative product comes online.
Key takeaways
• Quarterly net absorption was up 6.6 percent from one
year ago, while new construction deliveries increased
37.7 percent compared to one year ago.
• First quarter’s speculative deliveries totaled 37.5
million square feet, up 118.9 percent from the first
quarter of 2015. Twenty-four percent of the quarter’s
spec deliveries were leased by completion. Spec
deliveries may have skyrocketed from one year ago,
but the percentage of it preleased has remained
generally steady since 2014: New supply may be
increasing, but so has the leasing of it prior to delivery.
• The U.S. total vacancy rate is 50 basis points lower
than one year ago.
• Overall tenant requirements presently exceed the
current speculative construction pipeline in most of the
nation’s major warehouse markets. Although, this is
not the case in all size segments.
• Leasing activity is anticipated to be steady in 2016,
and more spec development will likely cause U.S.
vacancy to hover in the low-6s through year-end.
4
Vacancy is at a 16-year low; quality product is limited
Size does matter
The vacancy rate for the first quarter of 2016 was 6.2 percent-lower than
the previous cycle’s low point of 7.4 percent in early 2008. Net absorption
has been positive for six years running and warehouse asking rents have
increased for five years straight. Given how tight vacancy is, select larger
blocks of available Class A modern space choices remain limited.
Overall tenant requirements presently exceed the current speculative
construction pipeline in most of the nation’s major warehouse markets.
Many of these markets have been red hot in recent years, but there
appears to be a little cooling in some size segments. Conversely, other
size segments are beginning to heat up. This varies market-to-market,
but here are examples for Dallas / Fort Worth and the Inland Empire,
which led the nation in active speculative construction during the quarter.
Out with the old, in with the new
Leasing in facilities built in or after 2014 is increasingly driving overall
leasing activity. New space move-ins comprised 44.0 percent of 2014
net absorption (221 million square feet) and 59.0 percent of the 2015
total (231 million square feet). They comprised 78.0 percent of overall
absorption activity during the first quarter of 2016 (52.3 million
square feet).
•
•
First quarter net absorption was dominated by move-in’s into
facilities that were built in the last 27 months*
221 m.s.f.
in net absorption
44%
2014
231 m.s.f.
in net absorption
59%
2015
Q1'16
78%
0
New space move-ins into facilities built 2014+
comprised 78% of total absorption activity (52.3 m.s.f. in all)
100
200
*includes speculative, build-to-suit and owner-built facilities
Source: JLL Research
300
(s.f. in millions)
Approximately 38.0 percent of first quarter’s absorption activity came
from five markets: Atlanta (5.3 million square feet in net occupancy
gains), Chicago (5.2 million square feet), Inland Empire (3.6 million
square feet), Dallas / Fort Worth (2.2 million square feet) and Central
Pennsylvania (2.2 million square feet). Active construction in these
markets totaled 85.7 million square feet by the end of the quarter, which
represents 48.0 percent of the nation’s total (178.4 million square feet)
across 51 U.S. markets.
Both leasing activity and new development remains concentrated in and
around the nation’s major population centers, and – while leasing
fundamentals are healthy – new supply may get ahead of leasing activity
in certain size segments.
Fortunately, industrial development is fairly nimble with the average
warehouse facility taking 9-12 months to complete; developers can cease
future groundbreakings if a certain size segment is over-built. There is
also the option of dividing a newly built space into two smaller units—a
workaround that may better align with a given market’s demand pipeline.
Active tenant demand continues to exceed new construction in
major markets
(Based on their current spec pipeline relative to tenant demand)
Available: Under construction spec space
(s.f. in millions)
Net absorption from facilities built 2014+
Net absorption from facilities older than 2014
Inland Empire: New supply between 600,000 and 800,000 square feet
is outpacing tenant requirements. On the other hand, demand for
space under 400,000 square feet is pronounced, and rents in this
size segment have increased to a level where new construction
pencils out.
Dallas / Fort Worth: New supply is heavy in the 250,000- to 499,999square-foot segment, while demand is very active in product between
100,000 and 249,999 square feet.
30
Active tenant demand
DFW is the exception, however. Vacancy will likely fluctuate as
leasing activity catches up with new supply additions
25
20
15
10
5
0
Inland
Empire
Total market
4.1%
vacancy
DFW
6.5%
Chicago
7.1%
Central PA
Atlanta
8.3%
7.8%
* Warehouse & distribution facilities in excess of 100,000 s.f.
5
More spec development
Speculative construction, compared to two years ago, is very pronounced
in Atlanta (9.5 million square feet in the first quarter of 2016 versus 550,000
square feet in the first quarter of 2014) and Philadelphia / Central PA (8.6
million square feet versus 1.8 million square feet). It was up roughly 100.0
percent in Dallas / Fort Worth (21.9 million square feet) and Chicago (6.7
million square feet), and volumes are generally consistent in the Inland
Empire (14.3 million square feet) over the same time period. Although
vacancy rates are tight in these markets and demand is healthy, there will
likely be a time gap between when new supply delivers and when it
becomes leased. More product will be introduced at a swifter pace than it
has in recent years in many of these markets. This is especially true in the
big-box segment (500,000 square feet and greater), which comprises 49.4
percent of these markets’ collective spec construction.
Rent growth may slow if larger spec product delivers vacant
Annual U.S. warehouse asking rent growth of 4.5 percent is expected this
year, which is marginally slower than 2015’s year-over-year gain of 5.4
percent. The five aforementioned markets contain nearly 30.0 percent of
the nation’s 12.17 billion square feet in stock, and new product that delivers
vacant could moderate rent increases. In Atlanta, for instance, annual
warehouse asking rent growth of 7.3 percent occurred during the first
quarter, while a conservative forecast calls for 3.0 percent annual growth
by year-end 2016 as more spec construction comes online.
What does the future hold for the U.S.?
Speculative construction deliveries are increasing across the country, but
remain concentrated in and around the nation’s major warehouse markets.
Spec deliveries are expected to total 131.0 million square feet this year,
which marks a 13.9 percent increase from 2015, and – even though new
supply is increasing – the U.S. vacancy rate is anticipated to remain in the
low-6s through year-end.
Net absorption has averaged 56.1 million square feet per quarter from
2014 through the first quarter of 2016, and this average will likely remain
generally consistent over the next nine months: Warehouse tenant demand
is anticipated to remain strong and net absorption (209 million square feet
is expected this year) will almost certainly outpace new supply for the
seventh year in a row.
U.S. net absorption in Q1’16 was up 6.6% from one year ago
Vacancy will likely hover in the low-6’s through year-end; new spec
construction will likely be well-received
Q2-Q4
Total vacancy
300
12.0%
200
10.0%
8.0%
100
49.1 52.3
0
-100
-200
(Vacancy)
(s.f. in millions)
Q1 net absorption
6.0%
4.0%
2.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f
0.0%
6
Some highlights from around the country
Atlanta
After a slowdown in new construction deliveries in the fourth quarter of
2015, 2016 had a strong start, with 6.1 million square feet in new supply
added in the first quarter. This represents nearly 60.0 percent of 2015's
annual total.
Chicago
User demand continues to escalate as tenants seek to expand their
Midwest distribution footprint. During the quarter, three of Chicago's
largest availabilities were leased, leading to even greater user
competition for big-box space.
Dallas / Fort Worth
Supply and demand were largely in balance during the quarter, but the
construction pipeline set a new historical high. More product is signaling
a rise in the vacancy rate ahead, creating a shift more toward neutral
conditions over the next year (2017) and is expected to tip the market
into tenant-favorable conditions in 2018.
East Bay / Oakland
Vacancy sits at 2.4 percent and will likely remain low due to limited,
quality product. Many tenants are starting to take note of cheaper
alternatives in the North Bay and Central Valley.
Houston
Available sublease space is on the rise, while preleasing of under
construction spec buildings is minimal. Developers are hitting the pause
button on new groundbreakings, especially in the over-developed North
and Northwest submarkets.
Indianapolis
Bulk distribution space accounted for 51.6 percent of net absorption and
89.9 percent of new construction during the quarter.
Inland Empire
Small building construction is back in a big way: 26 facilities under
100,000 square feet were underway during the quarter, while there were
18 in the 100,000- to 399,999-square-foot segment.
Los Angeles
Los Angeles had the lowest vacancy rate in the country at 1.1 percent.
Its port-adjacent South Bay submarket was at a record-low 0.7 percent.
Miami
Sixty-five percent of tracked tenant requirements are looking to expand their
footprints—most are circling the Medley and Airport West submarkets.
New Jersey
Class A leasing activity continued at a feverish pace as tenants
committed to newly constructed product throughout Northern and
Central New Jersey. More speculative groundbreaking is expected in
the months ahead.
Philadelphia / Central Pennsylvania
3PLs and e-commerce tenants are very active in the market. Class A
and B vacancy rates are very tight, and the 8.6 million square feet in new
speculative construction set for delivery this year will give tenants a few
more modern space options.
Portland
Strong leasing activity has pushed vacancy to a new record low (3.6
percent). The development pipeline is full and the market should see the
addition of 2.5 million square feet in new supply in 2016.
Seattle
Both leasing and development activity are at levels that far exceed
anything in recent history. Tenant demand is not showing any signs of
slowing down, and rental rates – already higher than pre-recession rates
– will continue to increase.
Highest
annual net
absorption (s.f.)
Lowest
vacancy
Highest under
construction
(s.f.)
Los Angeles
1.1%
Atlanta
5,267,011
Dallas / Fort Worth
24,346,148
Orange County
1.5%
Chicago
5,221,996
Chicago
16,887,442
East Bay / Oakland
2.4%
Dallas / Fort Worth
3,910,409
Inland Empire
15,954,783
Long Island
2.6%
Inland Empire
3,623,126
Atlanta
15,264,172
Denver
3.2%
Nashville
2,277,304
Philadelphia /
Central PA
13,255,376
Portland
3.6%
North Bay
2,261,696
Houston
10,194,430
7
East Bay / Oakland, South Bay / Silicon Valley
SF Mid-Peninsula
Dallas / Fort Worth
Central New Jersey, Central Valley, Chicago, Denver, Hampton
Roads, Houston, Los Angeles,
Northern New Jersey, Philadelphia / Harrisburg,
Sacramento, San Antonio
Inland Empire, North Bay, Orange County, Portland,
Richmond, San Diego, Seattle / Bellevue, United States
Atlanta, Indianapolis, Long Island
Peaking
market
Falling
market
Rising
market
Bottoming
market
Baltimore, Memphis, Minneapolis / St. Paul, Nashville,
Salt Lake City, St. Louis, Tampa Bay, Washington DC
Columbus, Kansas City, Las Vegas, Miami-Dade,
Orlando, Pittsburgh, Reno
Boston, Cincinnati, Cleveland, Milwaukee, Phoenix
Charlotte, Detroit, Greensboro / Winston-Salem
Broward County / Fort Lauderdale, Jacksonville
Palm Beach
Moving clockwise
Holding steady
Moving counter-clockwise
Reading the clock
The JLL industrial property clock illustrates where each market sits within
its real estate cycle. Markets generally move clockwise around the dial,
with those markets on the left side generally facing more landlordfavorable environments, whereas those on the right experience generally
tenant-favorable conditions. At the end of the first quarter of 2016, the
U.S. aggregate moved clockwise to the 9:30 mark, in the peaking market
quadrant. All markets are rising, meaning landlords are increasingly
gaining leverage across the country. Rent growth is prevalent and
speculative construction is becoming more widespread in terms of both
geography and size segments. Fundamentals tightened in 27 of 51 local
markets this quarter. Currently, conditions are starting to/increasingly
peaking in 25 of the nation’s markets.
Rents in the Class A sector have firmed and are increasing in all U.S.
markets. As the big-box logistics sector in primary and secondary
markets continues to tighten, we continue to see some spillover into
demand and pricing for quality Class B product – as long as the pace at
which new speculative deliveries are added remain controlled we expect
this dynamic to increase, and – based on current tenant requirements
and economic indicators – this will likely be the case for most markets in
2016. Expect markets to continue their progressive clockwise moves,
while the overall U.S. position gradually climbs.
8
United States industrial weather map
Rents growing
(greater than 1.5% growth
year-over-year)
Average rental % change
year-over-year*
Rents stagnant
Rents falling
(between -0.5% and 1.5%
year-over-year)
(greater than 0.5% decline
year-over-year)
Average rental % change
quarter-over-quarter
Please note: Weather imagery indicates only the direction of movement of rental prices in a particular market and is not designed to indicate favorable or
unfavorable conditions for a specific leasing perspective.
9
United States industrial rankings
Total inventory (millions of s.f.)
Total vacancy rates
Pittsburgh
Boston
Phoenix
Reno / Sparks
Cleveland
Sacramento
Charlotte
Detroit
Baltimore
Memphis
Indianapolis
Atlanta
Washington DC
Jacksonville
Orlando
Richmond
Tampa Bay
Chicago
Las Vegas
Dallas / Fort Worth
Broward County
Hampton Roads
Columbus
St. Louis
San Antonio
Northern New Jersey
Central New Jersey
Kansas City
Houston
Nashville
Salt Lake City
Palm Beach
Cincinnati / Dayton
Silicon Valley / South Bay
Milwaukee
San Diego
Miami-Dade
Central Valley (California)
Inland Empire
Seattle
North Bay (California)
SF Mid-Peninsula
Portland
Denver
Long Island
East Bay / Oakland
Orange County (California)
Los Angeles
Chicago
Los Angeles
Dallas / Fort Worth
Atlanta
Inland Empire
Detroit
Houston
Northern New Jersey
Cleveland
Seattle
Kansas City
Central New Jersey
Charlotte
Phoenix
Cincinnati / Dayton
Columbus
St. Louis
Indianapolis
Memphis
Nashville
Denver
Tampa Bay
Salt Lake City
Miami-Dade
Milwaukee
Portland
Baltimore
Boston
Pittsburgh
Sacramento
San Diego
Long Island
East Bay / Oakland
Orlando
Las Vegas
Washington DC
San Antonio
Jacksonville
Broward County
Richmond
Reno / Sparks
Hampton Roads
Palm Beach
SF Mid-Peninsula
-
200 400 600 800 1,000 1,200
-2.0%
3.0%
8.0%
10
Year-over-year rent changes
YTD 2016 net absorption (millions of s.f.)
SF Mid-Peninsula
Denver
Nashville
Boston
San Diego
Inland Empire
Los Angeles
Chicago
Sacramento
Northern New Jersey
Richmond
Las Vegas
Atlanta
Hampton Roads
East Bay / Oakland
Orlando
Broward County
Charlotte
Phoenix
Detroit
Seattle
Memphis
Baltimore
Tampa Bay
Salt Lake City
Cleveland
Dallas / Fort Worth
Washington DC
St. Louis
Cincinnati / Dayton
Kansas City
Columbus
Central New Jersey
Reno / Sparks
Portland
Jacksonville
Milwaukee
Miami-Dade
Indianapolis
San Antonio
Palm Beach
Pittsburgh
Houston
Long Island
Atlanta
Chicago
Dallas / Fort Worth
Inland Empire
Nashville
Phoenix
Columbus
Memphis
Los Angeles
Indianapolis
Detroit
Northern New Jersey
Seattle
Jacksonville
East Bay / Oakland
Miami-Dade
Orlando
Cleveland
San Antonio
Pittsburgh
Houston
St. Louis
Tampa Bay
Baltimore
Portland
Washington DC
Richmond
Cincinnati / Dayton
Las Vegas
SF Mid-Peninsula
Denver
Central New Jersey
Milwaukee
Broward County
Palm Beach
Kansas City
Sacramento
Salt Lake City
San Diego
Boston
Reno / Sparks
Charlotte
Hampton Roads
Long Island
-20.0%
0.0%
20.0%
40.0%
(2.0)
0.0
2.0
4.0
6.0
11
Local U.S. industrial markets
12
Atlanta
Large tenant demand pushing market
Development pipeline soaring, speculative dominating
After weather delays at the end of 2015, new deliveries boomed this quarter,
totaling 6.1 million square feet, representing nearly 60.0 percent of the previous
year's total. Of the 3.9 million square feet of speculative construction to deliver
this quarter alone, over 50.0 percent is preleased. The largest of the new
speculative spaces is a 1.1-million-square-foot warehouse, occupied this quarter
by Google. The Northwest submarket especially is seeing a jump in delivery
numbers. Only two buildings in the submarket delivered from 2010 to 2015, while
this quarter’s deliveries boosted to five, with more under way; construction along
with as paper and packaging are two of the most active industries.
Development: historic, under construction, and proposed
Tight Class A big-box market
Amid the high amount of new deliveries, demand for big-box, Class A product is
steadily increasing, with only positive annual absorption since 2010 for
spaces sized 500,000 square feet and larger. Thus, even though construction
is seemingly abundant, tenant requirements of this large-size subset outweigh
available new deliveries and space under construction by nearly two million
square feet. This large, Class A space is increasingly necessary for modern
tenant requirements, including the two largest occupancies of this quarter;
Google and Smuckers, who took 1.1 million square feet and 1.0 million square
feet, respectively, of the highest quality warehouse and distribution supply.
Net absorption and availability, spaces sized 500,000 s.f. plus
Q1 exhibits strong large block activity
Activity for large blocks, sized 250,000 square feet and larger, went into
overdrive this quarter with three new leases, eight deliveries and seven moveins. Along with Google’s and Smuckers’ large block occupancy, other movement
includes Williams-Sonoma signing a new 1.1 million-square-foot lease; Surya
Carpets delivering their 1.0 million-square-foot distribution facility, occupying
about half of that space; and Trammell Crow delivering a nearly 900,000-squarefoot speculative building. With this level of activity, expect the availabilities in the
new space to become leased and occupied soon.
Large block movement
5,276,011
YTD net absorption (s.f.)
3,551,398
YTD leasing activity (s.f.)
+19,000,000
Active tenant requirements (s.f.)
7.8%
Total vacancy
20 M
0M
Q1 2016
Q4 2015
Q2 2015
Q1 2015
10 M
Q3 2015
15 M
5M
Proposed
Under
construction
BTS Spec Unknown
Absorption
Availability
25.0%
10 M
8M
20.0%
6M
15.0%
4M
10.0%
2M
5.0%
0M
-2 M
0.0%
2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
3.0 M
2.2 M
Delivery
New lease
Move-in
0.8 M
6,077,482
YTD new deliveries (s.f.)
13,234,172
W&D under construction (s.f.)
1.9 M
Move-in & delivery
$3.61
Average rental rate (p.s.f.)
7.8%
12-month rent growth
13
Baltimore
Modest growth fuels near-record-low vacancies
Existing tenant expansions fuel absorption
The Baltimore market experienced healthy growth with 588,011 square feet of
absorption in the first quarter of 2016. The relatively strong amount of
absorption, fueled by an expanding existing tenant base, pushed vacancy rates
down to a new 10-year low of 8.8 percent. Notable leases during the quarter
included Oldcastle BuildingEnvelope taking down 38,000 square feet at 6675
Amberton Drive, a pair of leases taking down nearly 95,000 square feet at 7465
Candlewood Road, and Harmon Home taking occupancy of 80,000 square feet
at 1904 Park 100 Drive.
Rental rates begin to level as large blocks remain vacant
Rental rates in the Baltimore market have seen modest growth in the first
quarter across all building classes, with little to no change in the more modern
Class A product. This is largely because the market has not seen many new
entrants, but rather modest expansion from its existing tenant base, which will
likely push landlords to provide more competitive rates during the remainder of
the year. These competitive rates may begin to shift market dynamics in favor of
the tenant in select submarkets. With 26 available blocks of space over 100,000
square feet available, the Baltimore market will likely rely on these new tenants
to drive rental rate growth.
Construction on the verge of outpacing absorption
Construction in the Baltimore market has begun to outpace absorption despite
nearly 90.0 percent of new construction in the market being preleased, the
majority of which are build-to-suits. It is likely that construction will slow in the
latter half of 2016 as modern product becomes increasingly more abundant.
Nearly 1.7 million square feet of modern, functional product built after 2010
remains vacant. Build-to-suits currently under construction include FedEx’s
306,000-square-foot building at Tradepoint Atlantic, Cefalu’s 160,000-squarefoot warehouse on Assateague Drive, and Coastal Sunbelt’s 240,000-squarefoot warehouse at 9001 Whiskey Bottom road, all of which are set to deliver in
the second quarter.
153,562,384
Total inventory (s.f.)
8.8%
Overall vacancy
588,011
Quarterly net absorption (s.f.)
588,011
Historical vacancy
15.0%
10.0%
5.0%
10.0% 10.3%
11.7% 11.3% 10.8%
10.1% 10.5% 9.7% 9.4%
8.8%
0.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
Available blocks of modern, functional space
30
24
18
12
26
6
0
9
100,000-249,999 s.f.
4
250,000-499,999 s.f.
>500,000 s.f.
Vacancy in modern industrial facilities
1,651,896 s.f.
Vacancy in buildings over 30,000 square feet
built after 2010
$5.12
Direct average asking rent
$10.49
Flex R&D average asking rent
878,216
Total under construction (s.f.)
89.9%
Total preleased
14
Boston
A fiery start to the year for Boston’s industrial market
Industrial fundamentals paint a bright picture in Greater Boston
The market for industrial space in Greater Boston experienced further tightening in
the first quarter of the year. Overall vacancy fell 60 basis points during the quarter to
12.2 percent. Vacancy in the market has been on a steady decline since 2011.
Much of the market’s strength can be attributed to improving industrial
fundamentals, particularly relating to job growth in industrial-using sectors.
Employment in trade, transportation and utilities grew by 2,750 jobs during the
trailing 12 months. Construction employment saw an even more impressive 8,060
jobs added over that same period. Overall, the past five years have seen over
46,000 industrial-using jobs created in Greater Boston. It is not surprising that this
time period has seen an associated vacancy decline of 4.9 percentage points.
Industrial overall vacancy
Healthy activity in the first quarter of 2016
The first quarter saw six different leases signed for spaces over 100,000 square
feet. The largest industrial lease signing of the quarter was a renewal by Entegris
Inc. in Billerica; the high-tech manufacturer renewed on 175,088 square feet at 129
Concord Road. Another notable renewal was that of HD Supply at 100 Meadow
Street in Boston. The industrial distribution company stayed in 152,000 square feet.
Warehouse & distribution direct average asking rent (p.s.f.)
12.0%
14.4%
10.0%
12.8% 12.8% 12.2%
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
$7.00
$6.50
$6.21 $6.30
$6.17 $6.27
$5.79 $5.73
$5.67 $5.62 $5.64 $5.73
$6.00
$5.50
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
Current conditions
Warehouse &
Distribution
Manufacturing
Flex/R&D
Peaking
market
Rising
market
Falling
market
Bottoming
market
Tenant leverage
Outlook
With yields on office product at cyclical lows, capital markets fundamentals have
shifted in favor of industrial assets. This has led to industrial sales volume over the
past 12 months of $2.3 billion. That is more than double the 12-month total for this
time last year and marks the most industrial activity ever seen in Greater Boston.
With a construction pipeline that is 79.0 percent preleased, demand for industrial
space in Greater Boston should continue to outpace supply, making 2016 an
exciting time for owners of industrial assets.
16.0% 17.4%
17.4% 17.1% 17.2%
16.8%
16.0%
14.0%
Landlord leverage
The largest warehouse sale of the quarter goes to Calare Properties at 25 Tucker
Drive in Leominster. Calare Properties sold the 588,000-square-foot property to
James R. Wiersma for $31.5 million. Calare, after acquiring the 588,000-square-foot
property vacant in 2012, signed a lease with Affordable Interior Systems (AIS) for
401,316 square feet in March 2014. AIS later expanded into the balance of the
building, and the asset has been at 100 percent occupancy since May 2015.
18.0%
182,083,149
12.2%
Overall vacancy
$6.30
Warehouse average direct
asking rent (p.s.f.)
1.4%
Quarterly warehouse rent growth
$6.93
Class A warehouse average direct
asking rent (p.s.f.)
7.4%
Class A warehouse direct vacancy
$5.99
Manufacturing average
direct asking rent (p.s.f.)
227,215
15
Broward
Leasing slows to start the year, but fundamentals continue
strengthening
Southern Broward submarkets remain in demand
Southern portion of the county continue being in-demand
Currently, over 48.7 percent of tracked tenants touring the market are eyeing
either Southwest or Southeast Broward. Further, these two submarkets also
accounted for 21.6 percent of all absorption gains in 2015. In addition, 45.0
percent of all leasing activity in 2015 occurred within these two submarkets,
which should help drive vacancy in the southern portion of the county. The
submarkets are favorable to tenants due to their proximity to Miami-Dade
County, transportation access and, particularly in the case of Southwest
Broward, the inventory of newer product. Absorption gains within these
submarkets, which totaled nearly 188,000 square feet, were offset by lackluster
demand in Central Broward.
30.7%
36.9%
14.4%
18.0%
SE Broward
SW Broward
West Broward
Other
Net absorption has outpaced deliveries since 2012
Tenant occupations keep pace with construction
Since the beginning of 2012, when no new product came online, absorption has
significantly outpaced new inventory by more than 2-to-1. The beginning of 2016
has followed suit, with tenants taking 177,300 square feet compared with
103,500 square feet of new product delivered in the first quarter. This trend will
likely continue through the year, as current tracked requirements also outnumber
product under construction by nearly double. The constrained development
pipeline has helped rent growth, which is up 8.0 percent from one year ago.
Planned construction activity in Northeast Broward dominates pipeline
While tenants have increasingly been eyeing Southeast Broward, developers are
betting on Northeast Broward’s future. There is currently over 380,000 square
feet of product under construction in Northeast Broward, or roughly two-thirds of
the industrial construction occurring in Broward. New product will be welcomed
in the submarket, as half of the buildings in the submarket (of over 8.6 million
square feet) were built before 1987. Further, there is less than 930,000 square
feet available in buildings constructed since 2000, which is 44.0 percent of all
available space in Northeast Broward.
3,000,000
Net absorption
New construction deliveries
2,000,000
1,000,000
0
2012
2013
2014
2015
YTD 2016
Northeast Broward primed to increase inventory
380,000 s.f.
Of product under construction in NE Broward
238,800
Available for sublease (s.f.)
6.5%
Direct vacancy
91,102,300
975,600
103,500
YTD construction completions (s.f.)
572,200
1,121,000
Total tenant requirements (s.f.)
$7.47
Average asking rent (p.s.f.)
16
Central Valley
Two big-box spaces completed in the first quarter
Bay Area market heat is boosting the Central Valley
Product and land constraints in the Bay Area have driven up demand for
industrial real estate in the Central Valley. Tenants and buyers are searching for
availability of larger contiguous quality product, at the same time – trying to
reduce real estate costs. Quality warehousing and distribution space is available
at a discount compared to the East Bay market. The Central Valley’s close
proximity to dense consumer populations in the Bay Area and the Northern
California region have drawn significant regional distribution requirements.
Demand: number of requirements by size
2
100,000 - 299,999 s.f.
300,000 - 499,999 s.f.
3
500,000 - 749,999 s.f.
1
750,000 - 999,999 s.f.
15
>1,000,000 s.f.
New developments and deliveries
New construction completions totaled 1,745,000 square feet in the first quarter of
2016, which is well above 2015’s first quarter, with 257,000 square feet of
construction delivered. Since 2015, there have been eight completed new
developments. This trend will continue with the 1,610,250 square feet currently
under construction that will add to the seven existing availabilities that are in the
250,000-plus-square-foot category. Asking rates, fueled by developers’ pricing
uptick on new deliveries, will continue to increase as new supply is delivered to
the market.
Available quality blocks of space: Warehouse & distribution
inventory (includes Class A & B-caliber inventory)
# of blocks
Available big-box space options are few
A lack of existing available product is slowing transaction activity. The market
has only three existing, available spaces that are 500,000 square feet or greater
and there are currently five tenants seeking spaces above 500,000 square feet.
The current demand is prompting developers to start projects in the Central
Valley. Development was at a standstill from 2009 to 2015, resulting in a market
that has not been overbuilt. Since larger users have limited options, deal volume
has not kept pace with the number of companies seeking space. Additionally
developers have seen demand for second-generation space rise as Class A
availability has been reduced.
Existing
10
11
5
Under construction
2
1
4
3
0
100,000 - 249,999 s.f. 250,000 - 499,999 s.f.
> 500,000 s.f.
Average sale pricing
$45.70 per s.f.
Average sale price for industrial
asset during the first quarter
5.6%
Total availability rate
$0.35
Class A distribution rent (p.s.f., mo.)
1,581,559
YTD 2016 net absorption (s.f.)
1,581,559
6,255,000
Active requirements (s.f.)
5
Existing blocks of space 250K+ s.f.
1,610,250
2
# of completions this quarter
17
Charlotte
Development pipeline healthy to open 2016
Rental rates rise as vacancy tightens
As demand continues to grow for quality available space in the Charlotte market,
landlords will have leverage in regard to asking rental rates. The first quarter of
2016’s average asking rental rate was $3.56 per square foot, up from $0.24 one
year ago when the average asking rate was $3.32 per square foot. Asking rates
are currently at an all-time high; this, coupled with tightening vacancy, helps
warrant the large amount of development in today’s construction pipeline.
Asking rental rates increased year-over-year
$4.00
$3.50
$3.00
$2.50
$2.00
2010
2011
2012
2013
2014
2015
YTD
2016
Construction shows no sign of slowing down
With multiple big-block developments occurring in the market, tenants will need
to have an organized real estate plan in order to secure premier space. The
steady decline of the market’s vacancy rate in recent years validates this. Two of
the three highlighted projects, Ridge Creek West II and Steele Creek 6, are
located in the State Line submarket.
Notable projects under construction
Absorption slow out of the gate in 2016
After strong positive absorption in 2015, absorption slowed in the opening
months of 2016, by posting a loss of 181,603 square feet. Given that vacancy
stays low and new product coming online finds tenants relatively quickly,
absorption is expected to pick back up in the second quarter of 2016.
Absorption lost speed in Q1 2016
10,000,000
5,000,000
(5,000,000)
2010
2011
2012
2013
2014
2015
YTD
2016
260,044,069
9.2%
Total vacancy
1,407,000
Tenant requirements (s.f.)
6,003,070
Planned construction (s.f.)
$3.56
Direct average asking rent (p.s.f.)
7.2%
3,082,535
83.6%
Total preleased
18
Chicago
Robust first quarter signals a strong start to 2016
Chicago’s market fundamentals on track
Notable leases
Chicago started of the year on the right track as several freshly inked big-box
transactions continued to drive leasing activity, placing even greater pressure on Class A
Tenant name: submarket
Deal type
inventory. In Monee, Hankook Tires signed with Venture One and DRA Advisors for
Hankook Tire: I-57
New lease
718,000 square feet in the former Michelin Tire space at 25850 S Ridgeland Avenue.
Hankook is expanding out of a 400,000-square-foot building it has outgrown at 1000
RJW Transport: I-55
New lease
Veterans Parkway in Bolingbrook. As Michelin vacates to a 1.7 million-square-foot buildto-suit in RidgePort Logistics Center, VentureOne was able to backfill the building with
OHL/Ghirardelli: I-55
New lease
zero downtime on the market. Along the I-355 Corridor in ML Realty’s Heritage
Crossings Business Park, two notable leases were signed, accounting for 900,000
LG Electronics: I-55
New lease
square feet of absorption. RJW Transport entered into a 10-year agreement to lease
ML’s 512,000-square-foot spec building, which delivered late last year. Just next door,
ML secured LG in a prelease of another 363,000-square-foot speculative building, which
is scheduled for delivery in September. As the first large users to commit to space along Notable sales
the I-355 Toll Road, these two deals marked a new milestone for the frontier
marketplace. In Northern Lake County two significant Class A availabilities are coming off
Buyer
Seller
the market. CenterPoint properties inked Handi-foil in the 213,000-square-foot former
Prudential
Bridge Development
TaChen manufacturing building at 5650 CenterPoint Court in Gurnee, and Globe Corp
signed HomeWerks to 190,000 square feet at 45—85 Albrecht Court in Lake Bluff. Globe
Midwest Warehouse
Molto
Corp is rumored to have a lease pending on the remaining 65,000 square feet in the
254,000-square-foot building. In the North DuPage submarket, Prinova Ingredients
Universal Laminating & Converting Northern Builders
signed a short-term lease for 100,000 square feet at 710 Kimberly Drive. Prinova is
Venture One: 9.5%
TA Associates
active in the marketplace for a 300,000- to 350,000-square-foot build-to-suit project.
Size (s.f.)
718,761
512,265
382,388
363,224
Bldg(s) | $ Price
s.f. per s.f.
1 | 588,000 $82.88
1 | 575,024 $47.75
1 | 113,135 $88.50
18 | 736,275 $50.22
(s.f.)
Sales recap
The largest portfolio to trade hands was TA Associates' sale of the Yorkbrook Business
Park, an 18-building flex and light industrial park on Eisenhower Lane in Lombard. The
Net absorption and vacancy
park, which stands 91.0 percent occupied, was acquired by Venture One for $36,975,000
Net absorption
Total vacancy
or $50.22 per square foot. In Joliet, Midwest Warehouse purchased the 575,000-square20,000,000
foot Speedway Distribution Center at 3451 S. Chicago Street from Molto Properties for
just under $48 per square foot. Approximately 209,000 square feet of the building will be
10,000,000
occupied by Otis Elevator through 2019. Midwest intends to use the balance of the space
0
for their 3PL operations. In the Carlow Corporate Center in Bolingbrook, Universal
-10,000,000
Laminating and Converting bought a 113,000-square-foot recently completed speculative
2010 2011 2012 2013 2014 2015 YTD
building at 910 Carlow Drive from Northern Builders. Northern preleased 35,000 square
2016
Source:
JLL
Research
feet to Braun’s Express before completing the quasi user/investment sale.
5.2 M
7.1%
Total vacancy
0
Available spaces over 1M s.f.
2
13.8 M
15.0%
10.0%
5.0%
0.0%
$4.79
2.56 M
4.85%
Available existing Class A
YTD construction completions (s.f.) RREEF Gary Ave Portfolio cap rate
distribution spaces over 500,000 s.f.
19
Cincinnati
Market strengthens as it awaits new product
Lack of available large blocks continues to tighten modern bulk market
Increased tenant demand in the market has driven rents up and the vacancy rate
down over the last eight quarters despite a shortage of newly constructed
modern bulk product. The lack of supply has shifted negotiating power in the
landlords' favor and decreased the size of leases signed. As landlords react
and begin to develop new blocks of space, it is projected there will be a change
in the current trend of users and footprint. With the upcoming availability of
modern bulk warehouse space in the market, a shift is projected from regional
retail and automotive users toward distribution centers serving a larger portion of
the country.
New announcements add to robust development pipeline
In the first quarter of 2016, four new speculative development projects were
announced in Florence, Blue Ash and West Chester, combining for over 1.2
million square feet. The announcements took place during an already historic
time for industrial development in Cincinnati, with over 3.1 million square feet of
space currently under construction at the end of 2015. The projects further
enforce developers’ confidence in the market and pent-up demand created by
the shortage of supply. With the influx of product coming online in 2016 and into
2017, vacancy rates are projected to increase and the market is expected to shift
back to tenant-favorable.
$3.74
Average total asking rent (p.s.f.)
4.8%
Total vacancy
3,455,815
1,200,000
Leases signed greater than 100,000 s.f.*
2,000,000
Total s.f. leased
Number of transactions
1,500,000
6
4
1,000,000
2
500,000
0
Q1 2015
Q2 2015
0
Q3 2015 Q4 2015 Q1 2016
*Analysis does not include BTS leases
Large available blocks, by building status
8
# of blocks
Large deals boost market while giants await
The market continues to make positive absorption gains due to the high leasing
velocity of the 100,000- to 250,000-square-foot size range. With the current
shortage of 500,000-square-foot and greater spaces available in the market,
tenants continue to fill smaller boxes across the market. These users are filling
local and regional needs, while the users looking for a national presence and
larger footprint choose neighboring markets such as Columbus, Indianapolis and
Eastern Pennsylvania. Despite the tightening in the market due to a lack of
supply, the outlook for leasing activity in 2016 is positive.
Existing
Spec—Planned construction
Spec—Under construction
4
0
250,000—499,999 s.f. 500,000 - 750,000 s.f.
>750,000 s.f.
Construction projects announced in the first quarter
Property
Landlord
Bldg s.f.
10900 Kenwood
Schuermann Properties
529,420
Ted Bushelman—CVG
VanTrust
400,000
1140 Regina Graeter Way
Paddock Rd LLC
188,800
Port Union Commerce Park Bldg E
Becknell Industrial
138,750
0
434,214
Quarterly const. completions (s.f.)
434,214
234,406,465
Market size (s.f.)
20
Cleveland
Market strengthens as demand outpaces supply
Market fundamentals tighten as Cleveland’s manufacturing base trends up
Cleveland’s industrial property sector continues to strengthen on the back of
solid economic growth. Between 1990 and 2015, gross regional product in
northeast Ohio increased 17.0 percent, while productivity increased an
astounding 92.0 percent. Furthermore, exports have increased 40.0 percent from
pre-recession levels. The economic gains experienced by the region have led to
increased demand from industrial users. Industrial availability has decreased
significantly in recent years and now sits in the single digits. Meanwhile, asking
rents have recorded healthy gains as the industrial market has moved toward
equilibrium.
Market rents and availability
Despite elevated construction levels, demand outpaces supply additions
Construction remains elevated across the region as developers work to keep
pace with tenant demand, particularly for modern bulk space. The efficiencies
gained through the column spacings and clear heights offered in modern bulk
product more than offset the rent premiums tenants incur. This is particularly true
when tax abatement and other economic incentives are taken into consideration.
Nearly 2.0 million square feet is expected to pass through the development
pipeline in 2016. While the majority of this space is built-to-suit and owner-user
development, more than 500,000 square feet is speculative.
Supply and demand (m.s.f.)
Sales activity in Q1 is a mix of owner-user and investment transactions
Capital markets activity in the first quarter totaled a little more than $23.2 million
and involved roughly 550,000 square feet of industrial property. Approximately
half of the transaction value (and half of the square footage) was identified as
owner-user transactions, while the balance was identified as investment sales.
Owner-user transactions had an average sales price of $36 per square foot,
while investment sales had an average sales price of $42 per square foot. The
top trade of the quarter went to Cedarbrook Management, which acquired a
41,184-square-foot flex building for $4.7 million, or $89 per square foot.
Capital markets activity
Total availability (s.f.)
9.6%
Total availability
699,562
YTD total net absorption (s.f.)
0.2%
Net absorption (as a % of stock)
Availability (%)
13.0%
$3.60
10.0%
$3.20
2011
2012
2013
Source: JLL Research, Team NEO
Deliveries
4.5
2014
2015
Q1 2016
7.0%
Net absorption
3.0
1.5
0.0
2011
2012
Sales volume
$80
2013
Total sales volume ($M)
2014
2015
Q1 2016
Average sales price ($ p.s.f.)
$80
$60
$40
$55
$20
$0
Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
$3.81
Total average asking rent (p.s.f.)
5.0%
12-month asking rent growth
Average price
31,954,409
Asking rent ($ p.s.f.)
$4.00
$30
349,412
1,147,766
21
Columbus
Increased leasing activity driven by logistics users
Columbus remains a top destination for logistics users
Since January 2015 logistics users have leased over 2.5 million square feet of
industrial space in the Columbus market. Columbus has remained a desirable
destination for this segment due to Rickenbacker Inland Port’s access to road,
rail and air transportation. Logistics users of all sizes are establishing operations
in Columbus, with leases ranging from 50,000 to over 1.0 million square feet. Not
only have tenant size requirements remained wide—ranging, but the locations
have as well. Logistics users have entered submarkets across Columbus to
boost their strategic location, further solidifying the market’s place as a premier
destination for this segment.
Strategic location of Columbus market
Foreign capital pours in as investment activity heats up
Cross-border capital accounted for 46.0 percent of total investment in the
Columbus market in 2015. Foreign investment activity was led by a joint venture
acquisition of the Exeter property group portfolio, consisting of 57.8 million
square feet in 25 U.S. markets, including 12 properties in Columbus. The two
groups, the Abu Dhabi Investment Authority and the Public Sector Pension
Investment Board of Canada, acquired the Columbus properties for $239.5
million. This trend shows investor confidence in the market as cross-border
capital accounted for less than 5.0 percent of capital flows in both 2013 and 2014.
Foreign capital investment flows over the last 12 months
47.0%
of the U.S. population lives within a 10-hour drive
Regional Breakdown
24%
39%
Americas
Asia Pacific
EMEA
37%
Source: JLL Research, Real Capital Analytics
Amazon jobs will boost already robust industrial employment sector
In the fourth quarter of 2015, online retailer Amazon announced two new
fulfillment centers in Columbus. The fulfillment centers, located in Etna Township
and Obetz, will create roughly 2,000 jobs in the Columbus market. Columbus’
diverse industrial base continues to benefit from a strong employment base and
low business costs, and employment growth is projected to continue in the
region throughout 2016. While Amazon’s hiring will provide a significant boost to
warehouse employment, manufacturing employment has also benefitted from
low gas prices. This trend has allowed auto and parts manufacturers in the
market to hire employees at an accelerated pace.
$3.62
6.3%
Total vacancy
3,482,117
1,200,000
Industrial employment trends (12-month change, 000s)
15.0
5.0
-5.0
-15.0
-25.0
2011
2012
2013
Trade, Transportation & Utilities
Manufacturing
Other Services
Mining, Logging & Construction
2014
2015
YTD 2016
903,220
1,709,212
Quarterly completions (s.f.)
1,709,212
240,045,988
Market size (s.f.)
22
Dallas / Fort Worth
Demand healthy, construction pipeline grows
Net absorption remains high, but construction outpaces it
Net absorption was a healthy 3.9 million square feet in the first quarter of 2016.
Due to new construction deliveries, the total vacancy rate moved up slightly to
6.5 percent, which is well below the market norm. Most submarket have
extremely low vacancy rates, making them strongly landlord favorable. Only two
submarkets (North Fort Worth and South Dallas) have vacancy rates in the
double digits and this is due to recent elevated construction levels.
Total vacancy, by submarket
S Stemmons
GSW
NE Dallas
NW Dallas
S Fort Worth
E Dallas
DFW Airport
N Fort Worth
S Dallas
2.2%
0.0%
2.0%
4.0%
4.2%
5.4%
5.4%
5.8%
6.0%
7.7%
8.0%
9.2%
10.8%
11.0%
10.0%
12.0%
Construction pipeline is above the historic norm, as spec construction
reaches new high for the market
Of the 24.3 million square feet under way, only 9.9 percent is built-to-suit, but
with preleasing on speculative construction as well, 28.7 percent of the
construction pipeline is accounted for. Construction is heavily concentrated in
three submarkets: South Dallas (33.0 percent), GSW/Arlington (24.0 percent)
and North Fort Worth (24.0 percent).
Construction pipeline, by submarket
2.3%
3.0%
24.4%
33.0%
9.6%
3.2%
24.0%
DFW Airport
GSW/Arlington
N Fort Worth
NE Dallas
NW Dallas
S Dallas
S Stemmons
Record absorption needed to keep pace with construction pipeline
New supply and demand were largely in balance for the first quarter, but with the
construction pipeline reaching a new high for the market, the market is expected
to begin shifting toward neutral conditions over the next year (2017). The rising
vacancy is expected to relieve some of the strong upward pressure on rates, with
effective rates leveling out over the next few quarters. Over the past year, rates
have increased 4.5 percent. At this point in the cycle, rates on bulk distribution
have flattened out, with most of the rate pressure taking place on the more
midsized shallow bay product.
711,638
Vacant sublease space (s.f.)
6.4%
Direct vacancy
22,575,000
43,444,434
Proposed construction (s.f.)
Unaccounted-for spec space set for delivery
17,300,000 s.f.
(Unaccounted-for spec pipeline under way)
90.1% vs. 9.9%
Spec construction vs. BTS
4.5%
24,346,148
28.7%
Total preleased
23
Denver
A slight softening provides a more sustainable future
Five years of cross-border investments in Denver
Construction remains strong and attracts new tenants
The I-70/East submarket remains the leading area for industrial construction in
Denver metro as developers take advantage of cheaper land prices and the
availability of large tracts. Developers and investors have cautiously navigated
the delicate balance between supply and demand in previous years in order to
prevent overbuilding the market to combat a potential economic slowdown. This
heedful thinking discouraged companies from expanding distribution networks in
Denver during and immediately after the recession. However, with the influx of
people moving to Denver, developers are now more willing than before to build
large-block distribution centers to meet the demands of national and international
companies wanting to establish or grow their presence in the market.
Healthy mix of tenants in the market (s.f.)
Decrease in oil prices influences increase in sublease space
The unsteadiness of the oil and gas industry has caused companies to reassess
their real estate strategy, including those companies with operations in the
Denver-Julesburg Basin. Vacant sublease space is at the highest level since
2012, measuring at 636,857 square feet. The Northeast and Weld County
submarkets are most heavily influenced by the energy sector and account for
43.0 percent of all vacant sublease space currently on the market. This amount
of sublease space presents an opportunity for those tenants that require flexible
terms and wish to be in a certain geography but couldn’t previously afford it.
3.2%
Total vacancy
4.5%
Total availability
273,756
Quarterly total net absorption (s.f.)
0.1%
(in millions)
Denver steady activity in foreign investment
Foreign investors have taken a keen interest in the Denver industrial market in
recent years, with over $268 million invested in 23 properties in 2015 alone.
During the first quarter of 2016, Mitsubishi was involved in two deals in the I70/East submarket, lending over $8.1 million in financing costs. Denver offers
investors a greater opportunity than coastal markets due to its favorable price
points, coupled with a diversified sector composition and overall economic
stability. These market fundamentals produce higher yields that will continue to
attract foreign investors as they are priced out of other substantially more
expensive markets with lower returns.
$300
$264.4
$250
$200
$150
$75.9
$100
$50
$0
Singapore
450,000
Canada
598,000
340,000
$45.4
China
$37.5
$18.6
Switzerland Hong Kong
Manufacturing
Logistics & distribution
Construction materials
558,000
470,000
530,000
Tech, media, & communications
Food & beverage
E-commerce
Historical vacant sublease space (s.f.)
800,000
600,000
400,000
666,076
577,302
439,936
200,000
0
636,857
586,029
Q1 2012
Q1 2013
Q1 2014
Q1 2015
Q1 2016
1,127,141
92,285
3,109,841
18.9%
Total preleased
24
Detroit
Detroit industrial continues to improve
Michigan industrial evolves with disruption
Michigan’s industrial market is garnering the most interest from those who
recognize the automobile industry is ripe for a disruption. Think driverless cars.
Detroit is already more symbiotic with Silicon Valley than some give it credit for.
There are more lines of code in the average car than in virtually every other
computer system in the world. The big question is whether or not Michigan has
the homegrown talent to fill these new advanced jobs, and if not, will the city and
surrounding areas be attractive enough to pique the interest of those looking at
the area for well-paying jobs?
Industrial employment trends (12-month change, 000s)
40.0
20.0
0.0
-20.0
-40.0
Manufacturing
Other Services
2011
2012
2013
2014
2015
2016
Get while the getting is good
Sensing a shift in economic sentiment and increased demand for industrial
properties in the market, opportunistic owners are looking to exit through
disposition for pre-recession prices. Average asking rents for the first quarter of
2016 were $4.50 per square foot, up 6.1 percent year-over-year. Many still feel
the necessary asking rate to justify speculative construction is closer to $5.00.
The Macomb County submarket and the Airport/I-275 Corridor are especially
high—demand areas, with availability rates of 5.9 percent and 9.1 percent,
respectively. Overall, total availability decreased 17.7 percent year-over-year to
9.0 percent. Look for strong speculative construction activity to continue in the I96 corridor and several bulk distribution projects slated to break ground before
the end of 2016.
Rents continue to rise
9.0%
1,358,317
0.3%
Net absorption (as a % stock)
Total W&D
Macomb W&D
$4.50
$4.00
$3.50
$3.00
2012
Detroit’s industrial continues to attract demand
Those looking to enter Detroit’s industrial property sector are finding an
environment that is similar to the U.S. industrial market as a whole—high demand
and not enough quality supply. There is no denying Michigan’s importance to the
supply chain due to its proximity to Canada and to the buying power of the region.
This goes to explain why Detroit along with Inland Empire, Dallas—Fort Worth,
Atlanta, Chicago and Philadelphia accounted for 34.1 percent of industrial
demand. However, there is reason for caution, as the potential weakening of the
U.S. manufacturing sector, a decline in exports and slowing growth in China may
negatively impact the market going forward.
41,216,015
Airport W&D
$5.00
2013
2014
2015
YTD 2016
Absorption remains positive as availability declines
4,000,000
Total availability
Quarterly absorption
3,000,000
10.0%
2,000,000
5.0%
1,000,000
0
Q1 2015
Q2 2015
$4.50
Average asking rental rate (p.s.f.)
6.1%
15.0%
Q3 2015
Q4 2015 YTD 2016
0.0%
1,404,552
459,951
25
East Bay / Oakland
Bay Area starts 2016 strong and continues to heat up
inventory (includes Class A & B caliber inventory)
Continued increases in demand drive market-leading land values
Tenant demand for space continues to exceed the market’s capacity, jumping
approximately 2.0 million square feet from this time last year. With vacancy at
2.4 percent, and availability just under 6.0 percent, developers are attuned to the
market’s opportunities – over 7.7 million square feet of proposed or planned
projects sit in the pipeline. Prominent sales this quarter to Lennar and Prologis in
Fremont and Oakland, respectively, marked all-time highs in price per square
foot, signs that the East Bay market is continuing to heat up.
Tenants in the market current demand (s.f.)
# of blocks
Port activity exceeds levels in 2014, prior to labor disputes, signaling both
recovery and overall growth
Total container volume at the Port of Oakland increased by 54.2 percent yearover-year in February 2016, totaling 188,139 TEUs. Both a strong U.S. dollar and
the solidified labor contracts contributed to the growth in port activity. The longterm future also looks bright; the redistribution of Ports America’s cargo business
and shipment activity to other terminals will fuel more concentrated revenue
growth and enhance future capabilities for infrastructure/system modernizations.
Meanwhile, some container freight stations in immediate proximity to the port
anticipate increases in container storage rates this year, which could potentially
trigger searches for space elsewhere.
6
Existing
Under construction
4
5
2
4
1
0
100,000 - 249,999 s.f. 250,000 - 499,999 s.f.
> 500,000 s.f.
695,000
505,000
Hold
Touring
Negotiations
7,265,000
Development & new deliveries
With at least 10 active requirements targeting space at a minimum of 250,000
square feet throughout the East Bay, the future absorption of the Prologis Silicon
Valley Logistics Park in Fremont seems promising. Overall, there are
approximately 4.3 million square feet of projects currently under construction, all
of which are expected to deliver during 2016. Major projects in the pipeline
include the LDK Ventures LLC proposed 707,800-square-foot distribution center
in Richmond, and the American Realty Advisors planned 800,000-square-foot
distribution center in Fremont.
Industrial product in the pipeline (s.f.)
7,760,787
Total planned and proposed
projects as of Q1 2016 (s.f.)
$0.63
Class A distribution asking rate (p.s.f.)
7.3%
908,391
1,270,672
7,265,000
4,271,205
0
0
Existing blocks of space 250K+ s.f. YTD construction completions (s.f.)
26
Large availabilities in the form of new development
Asking rates making a jump from 2014
With rental rates on an upward swing over the last year, the market is becoming
increasingly landlord favorable. With the current asking rate sitting at $2.96 per
square foot, up from one year ago when the rate was $2.73, rents continue to
climb as new development continues to deliver at market-leading rates. With the
jump of $0.23 in asking rates from 2015 to 2016, it marks the highest annual
change over the past five years.
Asking rates show a strong increase
$3.00
$2.80
$2.60
$2.40
2010
2011
2012
2013
2014
2015
YTD
2016
New available product on the way
As asking rates continue to climb and absorption remains steady, developers will
look to take advantage of the strength of the market. Based on active demand
requirements, the 900,000 square feet in under construction activity will likely be
well received by tenants. Although the pace of new announcements on future
development projects has slowed, the construction pipeline looks to remain
stable moving forward.
Development shows growth thus far
900,000 s.f.
Q1 2016 total under construction
Absorption slowing after quick ascent
As expected to kick off 2016, total net absorption has slowed down for the
Greensboro/Winston-Salem market. Although slow out of the gate, the first
quarter of 2016 still generated positive 792,479 square feet in activity. With
tenants seeking the best available options in the market, and new development
showing large availabilities, look for absorption to pickup steam heading into the
second quarter.
Absorption remains steady
10,000,000
7,015,323
5.0%
Total vacancy
792,479
0.4%
7,331,544
792,479
2011
9,030,802
5,000,000
0
202,079,532
5,758,958
7,477,340
2012
$2.96
12.8%
2013
2014
2015
YTD 2016
900,000
17.7%
Total preleased (s.f.)
27
Hampton Roads
Development pipeline still void of spec development
Emser Tile’s build-to-suit sustains supply pipeline
The first quarter of 2016 locked in another huge win for the Hampton Roads
industrial market with California-based Emser Tile penning a lease for a
401,066-square-foot build-to-suit in the South Suffolk submarket. Since 2011,
South Suffolk has captured 80.5 percent of all new construction in the entire
Hampton Roads market. This is in part due to pad-ready sites at master-planned
industrial parks, the lack of available land inside the beltway, and aggressive
state incentives that have made larger metros in Virginia an attractive alternative
to comparable markets along the eastern seaboard.
66,603,303
6.6%
Direct vacancy
-233,205
7.2%
Total availability
$350 million
In state-sponsored bonds issued
Hampton Roads Class A warehouse & distribution vacancy
2.5
(s.f. in millions)
Class A vacancy ticks upward, but still historically low
Post-recession, the supply pipeline has not yielded any speculative development
and has pushed Class A vacancy down to 3.1 percent, a seemingly large jump
from the 0.9 percent vacancy rate recorded in the previous quarter. Due to the
relatively low stock of modern, high-bay distribution product (9.2 million square
feet), this increase was created by only 206,163 square feet coming back online,
over half of which originated from Raytheon’s 126,000-square-foot downsize at
2555 Ellsmere Avenue in the Copeland submarket. Until market rents reach
levels equivalent to new construction pricing, upward of $5.00 per square foot,
triple net, developers will remain cautiously optimistic on speculative product,
which may accelerate rent growth moving forward.
Terminal upgrades approved for Norfolk International
27.2%
2.0
1.5
1.0
3.1%
0.5
0.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
Historical deliveries in Hampton Roads
(s.f. in millions)
Upgrades at NIT will boost TEU capacity, lessen container congestion
The Virginia General Assembly voted in approval in the issuance of over $350.0
million in state bonds, which will be used to improve and modernize Norfolk
International Terminal’s infrastructure. The upgrades will increase TEU capacity
by nearly 700,000 containers, or 48.8 percent. Upgrades to the port’s flagship
terminal, Virginia International Gateway, were also pending approval. Hinging on
the successful renegotiation of the Virginia Port Authority’s existing 20-year
lease, the possible 30-year extension and purchase option would make the
planned $320.0 million expansion to the facility financially viable.
3
2
1.1
1
0
All other submarkets
1.9
1.5
South Suffolk
0.9
0.7
0.2
2006
2008
2010
0.1
2012
2014
0.6
0.4
YTD 2016
$4.31 NNN
3.8%
12-month net growth
0
0
28
Houston
Demand begins to weaken in early 2016
Tenants’ cautious mentality seen in leasing activity
Leasing activity slowed to a crawl in the quarter and began to reflect tenants’
more conservative nature during the uncertain market. First-quarter leasing of
just over 2.1 million square feet is about one third of the 5.1 million-square-foot
average that Houston’s industrial market had seen over the prior 29 quarters.
Additionally, the first quarter recorded nearly 1.0 million square feet less of
leasing than the previous lowest quarter mark in 2009. Leasing size also
reflected a more cautious market, as the majority of leasing activity involved
leases of 40,000 square feet and under, while only eight transactions of greater
than 100,000 square feet were signed during the first quarter.
Leasing activity 1/3 of 2015 average (s.f.)
Tightening of east-side options continues
In terms of construction and development, the divide between west and east
Houston grew more pronounced during the first quarter of 2016. Large block
availabilities within under-construction buildings in east Houston dipped to 32
options with greater than 100,000 square feet available. West Houston’s supply,
in comparison, was nearly 70 options of greater than 100,000 square feet that
were under construction in the market. As tenant demand continues to be
forecast to decrease in 2016, Houston’s industrial market as a whole will see an
uptick in vacancy as a result of this space coming to market with no preleasing.
Under-construction leasing remains strong
8,000,000
6,000,000
4,000,000
2,000,000
0
2009
2010
2011
2012
2013
2014
2015 YTD 2016
# of blocks
200
East Houston
160
120
108
80
51
40
0
West Houston
40
15
8
24
50,000 - 100,000 s.f. 100,000 - 200,000 s.f.
> 200,000 s.f.
Key submarkets continue to be impacted by space availabilities
As a slowing of leasing activity combined with new sublease space additions,
Houston’s industrial market was negatively impacted during the first quarter.
Submarkets including the North and Northwest had total availability rates rise by
10.0 percent on average as tenant demand in the near term shifted to the
petrochemical-dominated east side. In comparison, the Southeast submarket
showed a tightening availability as the area benefited from not only
petrochemical companies’ continued expansions but also the increase in
retailers and distribution centers.
2,107,111
Leasing activity (s.f.)
5.2%
Direct vacancy
2,407,722
2,872,690
Available sublease space (s.f.)
Submarket availability
CBD
Southwest
Northeast
North
Northwest
Southeast
South
Q1 2016 available
Q1 2015 available
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
5.3%
13,938,089
10,194,430
635,860
Total net absorption (s.f.)
29
Indianapolis
Solid activity to start the year for industrial market
Construction activity slows
After seeing nearly 12.5 million square feet of new industrial product added to the
market during the past two years, it appears, at least in the early stages of 2016,
that developers may be taking a slight step back this year. Only 833,431 square
feet of new construction was added to the market this quarter. Nearly 1.9 million
square feet remains under construction, with an additional 1.1 million square feet
expected to break ground later this year. While this still equates to a robust 3.0
million square feet of projected completions this year, it would still be about half
of what was delivered in each of the last two years. This will allow time for the
space already delivered to be absorbed while keeping the market from
becoming overbuilt.
Strong leasing activity leads to occupancy growth
The industrial market absorbed nearly 1.6 million square feet during the first
quarter of 2016. This total matches the previous two quarters combined and is
the highest single quarter of net absorption in almost a year. Nearly 15 lease
transactions closed this quarter in excess of 100,000 square feet, 62.0 percent of
which were new leases. The largest of these involved New York City–based
publisher Hachette Book Group expanding its operations in Lebanon Business
Park by an additional 418,400 square feet. Hachette will now occupy close to 2.0
million square feet in the park spread across three buildings.
Investors remain sold on Indianapolis
Thirteen investment transactions closed during the first quarter, totaling more
than 6.0 million square feet of industrial product. While the majority of these
transactions involved bulk distribution facilities, four flex transactions also closed
this quarter along with two midsized facilities and a manufacturing building. This
investor activity across all segments of the market demonstrates the overall
strength of the Indianapolis industrial market. Look for investor interest to remain
high in Indianapolis throughout the remainder of 2016, particularly in regard to
bulk distribution.
211,342,839
7.8%
Total vacancy
1,564,956
0.7%
Absorption (as a % of stock)
*Significant alterations to our tracked inventory and submarkets were made in the first quarter,
rendering statistical results that diverge from the recent historical trend.
New construction deliveries (s.f.)
8,000,000
6,419,020
6,000,000
4,000,000
2,000,000
5,935,864
3,493,047
1,717,509
833,431
0
2012
2013
2014
2015
YTD 2016
Historical total net absorption (s.f.)
6,000,000
5,222,205
3,261,796
4,000,000
2,000,000
1,612,378
1,564,956
994,737
0
2012
2013
2014
2015
YTD 2016
Notable investment sales
Project
Buyer
Size (s.f.)
Transpacific Portfolio
Biynah Industrial Properties/Olympus
Ventures
DCT Portfolio
Transwestern Investment Management
631,714
Precedent South
Industrial Property Trust
612,000
3,858,713
$3.46
0.3%
1,852,450
833,431
30
Inland Empire
Market fundamentals point to a healthy 2016
E-commerce, location and land are key drivers for demand
E-commerce accounts for 7.5 percent of total retail sales in the United States,
but online sales are growing at a rate five times faster. In a centralized area,
Inland Empire’s close proximity to the ports and available land to build makes it a
desirable location for current and prospective tenants. Within a 50-mile radius of
Ontario, the total population is approximately 15 million people, bringing
companies such as HauteLook (Nordstrom), Amazon and Wayfair closer to its
customers. In addition to location, Inland Empire also has land for build-to-suit
developments that can accommodate employee parking, higher clear heights
and specific buildouts for e-commerce fulfillment centers.
Leasing activity up and balancing between the East and West
Leasing activity remained strong in the Inland Empire, with 7.6 million square
feet in new transactions. Small-box, or light industrial, accounted for nearly 78.4
percent of new activity, with 40 deals and 11 in the big-box sector. On a
submarket level, IE West continues to lead the market, with approximately 4.6
million square feet leased; however, IE East’s growing inventory will level the
playing field in the future. Over the past five years, IE East’s construction
completions accounted for 40.0 percent of the total inventory base for buildings
over 100,000 square feet. Renewals were also strong this quarter, which will
likely pick up, as several tenants’ leases are set to expire.
New construction will continue to shape the market
Development will continue to be a major theme for the Inland Empire in 2016,
with groundbreakings escalating in the coming quarters. The size of buildings
under construction will get smaller to accommodate for demand and lack of
product in the sector. Close to 10.5 million square feet of spec space is slated to
deliver in the second quarter, which will temporarily drive vacancies up. Given
demand, however, vacancy should stabilize in the second half of the year.
Taking rents will continue to increase and asking rents will rise to and surpass
pre-recession highs.
3,623,126
4.1%
Total vacancy
1,180,396
BTS completions (s.f.)
15,954,783
Under construction (s.f.)
Historical vacancy rate
YTD 2016
2015
2014
2013
2012
2011
2010
4.1%
0.0%
2.0%
4.0%
5.3%
5.2%
5.1%
6.2%
6.0%
7.7%
8.0%
10.1%
10.0%
12.0%
Los Angeles and Long Beach Port TEU volumes
10,000,000
Loaded Imports
Loaded Exports
8,000,000
6,000,000
4,000,000
2,000,000
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
Source: Thomson Reuters, JLL Research
Notable leases
Tenant name
Deal type
Size (s.f.)
Amazon
Direct
1,102,639
Port Logistics (leased two buildings)
Direct
885,000
Bradshaw International
Direct
544,717
5,073,541
Spec construction completions (s.f.)
6,253,937
2.1%
IE West vacancy
6.8%
IE East vacancy
31
Jacksonville
Local market conditions support continued growth
Industrial-related employment gains outpace other sector employment
Jacksonville’s overall employment climate is improving with a 3.3 percent growth
year-over-year. Additionally, employment gains in industrial-supporting jobs are
outgrowing employment in professional and business services industries. This
quarter, construction, manufacturing, and trade and transportation employment
had 5.3 percent, 3.1 percent and 3.2 percent year-over-year gains, respectively,
while the information industry lost 1.1 percent of jobs (during the same time
period). Concurrently, finance (0.8 percent) and professional and business (1.5
percent) employment endured a marginally flat gain year-over-year. The positive
employment climate for industrial-related jobs is a supporting indicator of
growing industrial demand in Jacksonville.
Durable goods manufacturing industry projected to expand
Manufacturing space makes up 22.0 percent of total industrial inventory in
Jacksonville. The Greater Jacksonville region has maintained its status as one
of the largest manufacturing markets in the state. Given the historically active
manufacturing industry, growth in this product type is a clear sign of economic
recovery. According to economic projections, durable goods manufacturing is
expected to have an 8.0 percent increase in employment over the next eight
years, a figure nearly double the statewide projection of 4.7 percent in that same
time period. The potential impact is supported by the increased housing
construction and demand for automobile parts, as motor vehicles remain both
the largest import and export commodity product at JAXPORT, with $12.0 billion
in value traded per year.
The Westside submarket outpaces all submarket leasing activity
Overall market leasing began at a strong pace this year with over 788,000
square feet leased, with about 38.1 percent of the total square footage leased in
the Westside submarket. Tenants such as Redi Carpet, Liberty Pumps and TCI,
which leased over 30,000 square feet at Emerik Properties’ 6740 Broadway
Avenue, contributed to the 295,000 square feet of activity in the Westside
submarket this quarter. Along with the strong leasing climate, the Westside
submarket vacancy rate is about 260 basis points below the total market rate of
7.6 percent. Given these strong fundamentals, the Westside submarket is
projected to continue outpacing the total market.
181,366
Available for sublease (s.f.)
7.6%
Direct vacancy
510,433
788,170
Quarterly leasing activity (s.f.)
Job growth/loss by select industry sector (12-month change)
Leisure and Hospitality
Trade, Transportation, and Utilities
Construction
Professional and Business Services
Financial Activities
Manufacturing
-100
Information
-2,000
6,200
4,300
1,800
1,500
1,300
900
0
2,000
4,000
6,000
8,000
Source: Florida DEO, JLL Research
JAXPORT 2015 value of top commodity exports in millions ($)
$139
$169
$253
$129
Motor vehicles (transporting
people)
Motor vehicle parts
$118
Insecticides, fungicides
Polyamides
$4,305
Chemical woodpulp
Source: World City Trade, JLL Research
Leasing activity proves Westside submarket share (number of deals)
Total market
200
Westside
100
0
2012
2013
$54.48
Average sales price (p.s.f.)
7
Quarterly transactions
2014
2015
YTD 2016
237,300
0%
Total preleased
32
Kansas City
Market cools, but big 2016 anticipated
Completions vs. net absorption
13.0%
YTD completions preleased
5.7%
Total vacancy
+30 bps
Vacancy is up from one year ago
4,000,000
0
-2,000,000
2010
2011
2012
2013
2014
2015
YTD
2016
Total vacancy
Another speculative building success story
The largest spec development in the history of Kansas City, totaling 822,177
square feet, has secured Amazon.com to lease the entire building. Amazon
plans to employ between 1,500 and 2,000 employees at the new, state-of-the-art
fulfillment center located in Edgerton, Kansas, in the southwest quadrant of the
Kansas City metro area. With this announcement, NorthPoint plans construction
of two additional speculative buildings, totaling over 1.6 million square feet, at
Logistics Park Kansas City. The speculative construction pipeline shows no
signs of slowing down and could deliver in excess of 10.0 million square feet
over the next 18 to 24 months.
1,506,911
Net absorption
2,000,000
Vacancy rate ticks up
The Kansas City industrial market vacancy rate increased slightly to 5.7 percent.
Due to the continued delivery of speculative industrial buildings, this slight uptick
is projected to continue across 2016. However, vacancy’s fluctuation during the
course of 2016 should be nominal due to the current balance between
construction completions and active requirements in the marketplace.
Completions
6,000,000
(s.f.)
Despite negative net absorption, strong market velocity continues
After posting positive net absorption in excess of 4.3 million square feet during
2015, the Kansas City industrial market experienced negative absorption,
totaling approximately 500,000 square feet during the first quarter of 2016. The
negative absorption was primarily attributed to the delivery of a 491,448-squarefoot building at Riverside Horizons that is 11.0 percent leased and the 450,660square-foot building at CenterPoint Intermodal that is fully available. However,
the pipeline of active requirements in excess of 100,000 square feet totals
approximately 4.0 million square feet. It is anticipated that a number of these
requirements will be completed during the 2016 calendar year in speculative
product. Over 3.0 million square feet of speculative construction will deliver
during the remainder of 2016.
8.0%
7.0%
7.6%
7.6%
6.0%
6.3%
5.0%
4.0%
2010
2011
2012
6.1%
6.1%
2013
2014
5.7%
5.4%
2015 YTD 2016
Notable leases
Tenant name
Deal type
Amazon.com
New
822,177
Sioux Chief
New
240,000
SP Richards
New
198,783
Sparhawk Laboratories
Expansion
100,000
$4.22
+3.7%
Size (s.f.)
5,130,394
14.2%
Total preleased
33
Las Vegas
Spec big-box preleasing; lack of mid-bay space
Mid-bay product availability lacking
While most of the recent buzz and spec development has been focused on the bigbox market, and with a strong overall leasing market in all size categories and
product types, Las Vegas has seen a shortage in the mid-bay product type. Only
one developer has decided to build a project that offers smaller mid-bay industrial
spaces: Harsch Investment Properties broke ground on its Harsch Henderson
Commerce Center IV in the SE/Henderson submarket with a 240,000-square-foot
building at 451 W Warm Springs Road that will offer spaces from 17,000 square feet.
The project will offer frontage on Warm Springs Road with rear loading. Delivery is
slated for the fourth quarter of this year.
Hot Las Vegas market continues to get hotter
All of the new developments in 2015 and the first quarter of 2016 added 2,160,022
square feet to Las Vegas' industrial inventory. This, coupled with all of the leasing
activity in the same period, which accounted for 3,750,002 square feet in total in
total absorption, means the vacancy rate continues to drop, now at 6.5 percent,
while asking rents continue to climb, up to $6.60 per square foot per year. Given
current construction and leasing activity, local brokers and developers are feeling
bullish and do not expect the market to slow down.
450,731
0%
6.5%
Total vacancy
-150 bps
Vacancy is down from one year ago
s.f.
Spec project preleasing continues
With close to 2.8 million square feet in under-construction activity in the Las Vegas
valley, developers are finding success with preleasing. Prologis, for instance, leased
its 232,856-square-foot Black Mountain Distribution Center #3 project in the
SE/Henderson submarket with a single tenant, Core-Mark International, Inc. The
project was nearing completion when the deal was signed. Panattoni also saw some
success on its two-building, 416,000-square-foot South Jones Corporate Park
development with a 78,000-square-foot lease signed by Freeman. Prologis saw
tenant activity on its North 15 development by preleasing one of the two buildings.
The project totals 410,640 square feet, and 215,120 square feet was committed to.
The only exception to the spec development preleasing success has been the Pauls
Corporation’s Lone Mountain Corporate Center – Phase 1 (450,731 square feet in
all) that delivered this quarter as vacant.
Completions
4,000,000
Net absorption
3,000,000
2,000,000
1,000,000
0
2010
-1,000,000
2011
2012
2013
2014
2015
YTD
2016
6.4%
6.5%
2015
YTD
2016
Total vacancy
15.0%
10.0%
13.7% 14.2% 13.1% 12.9%
10.8%
5.0%
0.0%
2009
2010
2011
2012
2013
8.6%
2014
Notable leases
Tenant name
Deal type
Size (s.f.)
Amazon.com
New
84,220
Murray Feiss Import LLC
New
207,070
Core-Mark International
New
232,856
$6.60
+8.0%
2,798,987
20.4%
Total preleased
34
Long Island
Leasing in Nassau County pulls vacancy to new low
Dearth of large blocks of space leads to slowdown in user sales activity
Industrial properties in Long Island maintained a stable average sale price as
potential buyers competed for quality buildings. After escalating to $74.96 per
square foot in 2014, the average sale price in Nassau and Suffolk counties stood
at $77.00 per square foot in the first quarter of 2016. User sales activity among
larger tenants declined due to limited options to house operations, while
investment sales activity increased. Among the largest sale transactions this
quarter was Certified Laboratories’ purchase of 65 Marcus Road, a 60,000square-foot distribution center in Melville, for $6.8 million, or $113.00 per
square foot.
Persistent demand drives Nassau vacancy rate lower
The Nassau County industrial market saw an uptick in leasing velocity in the first
quarter, which pulled vacancy rates down to 3.7 percent— 30 basis points lower
than in year-end 2015 and 150 basis points lower than just one year ago. The
Western Nassau submarket registered the lowest vacancy rate in Nassau County
at 2.7 percent, with the Central/Eastern Nassau submarket following with 3.8
percent. The leading lease transaction of the quarter was retailer Amazon’s
signing of 156,000-square-foot lease at 201 Grumman Road in Bethpage with
owner Steel Equities. This property was previously owned by Goya Foods.
Chemical manufacturing places 2nd in industry growth rate
The expanding chemical manufacturing industry in Long Island is the largest out
of the 10 regions in the state and has the second fastest employment growth rate
(after the food and beverage industry) at 20.2 percent over the 2009–2014 time
period. This activity is heavily concentrated in the pharmaceutical and
nutraceutical manufacturing subsector, which has rapidly become one of the
primary drivers of leasing activity in Hauppauge over the course of recent years.
Despite the burgeoning market fueling demand, pharmaceutical companies face
the issue of attracting and retaining jobs among the younger workforce. As
companies expand east into Suffolk County, the need for affordable housing is
becoming crucial to sustained growth.
114,763,837
Total industrial inventory (s.f.)
2.6%
Total vacancy
-403,707
5.6%
Total availability
Nassau and Suffolk average sale price (p.s.f.)
$80
$70
$60
$74.96
$71.80
$61.72
$50
$78.00
$77.00
2015
Q1 2016
$61.68
$40
2011
2012
2013
2014
Nassau overall industrial vacancy trends
6.0%
4.0%
5.2%
4.7%
4.4%
4.0%
Q3 2015
Q4 2015
2.0%
0.0%
Q1 2015
Q2 2015
3.7%
Q1 2016
Fastest growing industries in Long Island from 2009 to 2014
Food & beverage
Chemical mfg.
Electrical equipment mfg.
Social assistance
Personal and laundry services
20.2%
2.0%
12.0%
22.0%
Source: JLL Research, NYS Department of Labor
$10.08
Overall average asking rent (p.s.f.)
-0.08%
449,824
68.4%
Total preleased
35
Los Angeles
A lack of options is putting pressure on users
Industrial activity still going strong
The U.S. economy showed little indication of slowing as stability continues to
draw foreign investment into gateway markets like Los Angeles with a keen eye
on industrial real estate. As a result, the Los Angeles industrial market remained
very competitive through the first quarter of 2016, driven by strong demand and
limited available inventory. Vacancy reached its lowest level ever, while average
rents have increased by 11.0 percent year-over-year. Rents are expected to rise
by another 6.0 percent at the end of the year as the market gets tighter and
demand continues to grow. These market conditions have pushed tenants to
consider early renewals to avoid higher rents.
Lack of space leading to tenant renewals
Tenants who come to the market seeking space will quickly understand the tight
conditions and competitive environment due to the lack of available space
options. Consequently, it is becoming more common to consider earlier renewals
just to secure their future needs. Five of the top 10 deals in the first quarter were
renewals with at least 60-month commitments. As competition for available
quality space tightens with each quarter, expectations for tenant concessions are
diminishing; tenants are seeing less in free rent and tenant improvement
allowances as leverage favors landlords.
New deliveries are unable to satisfy the growing demand
The industrial market’s momentum will keep on chugging along throughout 2016
in the Los Angeles Basin. Tight conditions, coupled with strong demand, point to
the need for more development in 2016 in places where the opportunity to build
is feasible. Additionally, the growing presence of e-commerce users in the
market adds to the already strong demand for quality available facilities. With
only 4.0 million square feet of industrial projects currently under way—along with
sustained demand – all indications point to requirements exceeding deliveries
and the overall environment becoming increasingly competitive.
800,987,053
Inventory (s.f.)
4,008,687
1,611,383
Annual historical vacancy rates
YTD 2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
1.1%
2.2%
3.3%
3.9%
2.8%
2.6%
0.0%
1.0%
2.0%
3.0%
4.5%
4.0%
5.0%
5.3%
5.5%
5.1%
5.0%
6.0%
Source: JLL Research. Buildings 10,000 square feet and larger. Includes under-construction buildings.
Current availability rate, by submarket
2.4%
LA North
3.2%
LA Central
Mid-Counties
3.0%
South Bay
4.4%
2.6%
San Gabriel Valley
Source: JLL Research. Buildings 10,000 square feet and larger. Includes under-construction buildings.
Notable leases
Tenant name
Deal type
Size (s.f.)
G.P.R. Logistics, LLC
Renewal
322,817
Forward AIR
Renewal
253,354
Kenko Group
New
185,060
1.1%
Total vacancy rate
80.0% vs. 20.0%
717,682
Spec construction vs. design-builds YTD construction completions (s.f.)
3.2%
$0.70
Avg. total asking rent (p.s.f., mo.)
36
Memphis
Absorption drives vacancy down
(s.f.)
Positive growth continues in the market in early 2106
With over 1.6 million square feet of positive net absorption in the first quarter,
2016 looks to have another solid year coming on the heels of 2015’s banner
year. 2015 marked the highest annual absorption gain ever for the Memphis
market. In addition to healthy tenant demand, there is significant capital chasing
quality assets in the market. New-to-market domestic and foreign capital is
growing through large portfolio acquisitions and recapitalizations.
Completions
15,000,000
10,000,000
5,000,000
0
2010
Demand is exceeding available supply; landlords have the leverage
With absorption keeping up with new construction completions, Memphis is in
short supply of Class A product and Class B is also in limited supply. Substantial
Total vacancy
absorption over the past two years in the small- and mid-box segments has
15.0%
created a very healthy market from top to bottom. Tenant demand remains
strong in mid- to small sizes, and the market began to favor landlords 24 months
14.2%
10.0%
ago—both are anticipated to hold true in the years to come. With net absorption
outpacing new completions for the past three years, increased speculative
5.0%
construction is warranted. Developers, unsurprisingly, remain bullish on the
market, and—while we saw a temporary lull in new product deliveries in 2015—
0.0%
the pipeline of new spec deliveries increased in the first quarter of 2016 and
2010
should have a healthy pipeline of deliveries in the second half of 2016.
13.9%
Market shifts to build-to-suit construction from speculative in Q1
While three spec buildings were delivered in the first quarter of 2016, totaling
almost 1.4 million square feet, there are no remaining buildings currently under
construction on a spec basis. One large 1.5 million-square-foot build-to-suit
kicked off for TBC Corporation in Fayette County. Due to the lowest vacancy in
the market’s history and strong tenant demand, new spec construction is
warranted, and it will pick back up next quarter and throughout the remainder
of 2016.
Net absorption
2011
2012
14.1%
2013
13.5%
2014
2015 YTD 2016
11.8%
8.0%
8.0%
2011
2012
2013
2014
2015 YTD 2016
Notable leases
Tenant name
Deal type
Size (s.f.)
TBC Corp
BTS
1,500,240
Nike
New
708,532
PFSweb
New
275,400
1,781,513
8.0%
YTD completions (s.f.)
Total vacancy
22.9%
-200 bps
YTD completions leased on delivery Vacancy is down from one year ago
$2.70
+5.9%
12-month rent asking rent growth
1,500,240
0%
is speculative product
37
Miami
• Foreign capital
• New developer influx
• Population growth
Momentum from 2015 continues to start the year
After a record high in 2015, development pipeline continues growing
Speculative warehouse and distribution development continued this quarter, with
over 950,000 square feet delivered. Going back to the start of 2015, just over 3.0
million square feet has come online; further, upon delivery that product was only
41.0 percent preleased, demonstrating developers' confidence in the market.
There is an additional 1.8 million square feet currently under construction–the
vast majority of which is under way in Medley with very little preleasing. Still,
despite the robust development pipeline, construction and planned projects
are more or less in line with demand, as tenants occupied nearly 900,000
square feet of inventory this quarter and 3.3 million square feet over the previous
four quarters.
5.0%
Total vacancy
7.9%
Total availability
180.5 M
1.1 M
TEUs in Thousands
TEUs
1,200
Occupancy
98.0%
900
94.0%
600
90.0%
300
0
86.0%
reqs. (s.f. in thousands)
Future demand projected to come from organic growth
2,000
1,500
1,000
500
0
865
Stable
1,545
305
Expansion
New-to-market
Development on pace to surpass last year’s eight-year high
s.f. in thousands
Majority of requirements comprise expansions or relocations
Of the touring tenants currently being tracked, the vast majority of tenants are
currently located in the market and looking to expand their footprint, while newto-market tenants remain scarce. Of the 2.7 million square feet of requirements,
68.1 percent comprise expansion activity. The number of new-to-market tenants
has decreased compared to last year (11.2 percent of current requirements are
new-to-market, compared with 23.9 percent at the end of 2015). That 83.5
percent of expansion activity is through organic growth within the market bodes
well for the local economy. Further, with the local economy expected to grow
throughout the year, expansion activity should continue among existing tenants.
Estimated TEU volume likely in line with record 2015 figure
Occupancy
Increased PortMiami activity helps occupancy gains
Last year, PortMiami saw a 10-year high in TEU volumes, breaking the 1.0
million TEU mark for the first time, which represented a 15.0 percent increase.
This surge in TEU volume correlated with a 100 basis point occupancy increase
year-over-year. So far this year, PortMiami has averaged 89,100 TEUs, 5.0
percent higher than the trailing five-month average. As such, we expect
PortMiami TEU volumes to finish the year slightly higher than last year. If this
correlation holds true, the market should have a similar year; however, with
many speculative projects being delivered that are not significantly preleased,
occupancy rate gains may be muted despite strong market dynamics.
3,000
2,000
1,000
0
887,900
2.7 M
1.8 M
951,000
YTD construction completions
38
Milwaukee
Business expansions propel Milwaukee industrial
Economic overview
While a majority of the uptick in Milwaukee Metro unemployment over the last few
months can be attributed to service providers, mining and manufacturing industries have
also displayed slight stagnation. Although the manufacturing sector experienced a
negative 12-month growth rate of just -0.2 percent, a look into other metrics completes
the story. For manufacturing production workers, average weekly hours have increased
by 3.1 percent over 2015, yet average hourly wages have decreased by 2.7 percent.
While it would be preliminary to suggest a substitution between additional jobs and
overtime from current employees, it will be interesting to see what implications
employment movements in this sector have on industrial development in the region.
Leasing activity
Pieper Electric committed to a new lease with Luterbach Properties for 82,387 square
feet at 5475 S Westridge Court in New Berlin. Avanti Wind Systems will be relocating
from 5150 Towne into 67,544 square feet at 11311 W Forest Home Avenue in the North
Cape Industrial Park. In Jackson, Rytec Inc. leased 56,000 square feet at N169 W21010
Meadow Lane from Quality Stamping & Tube. Paragon Development Systems has
leased roughly 50,000 square feet at 39605 Hwy 16 as it relocates and expands within
Oconomowoc following the sale of its warehouse facility at 1823 Executive Drive.
Investment sales overview
Rudebusch sold a newly developed 200,000-square-foot FedEx Ground build-to-suit in
Menomonee Falls to single-tenant investor Cole Real Estate for just shy of $100 persquare-foot. The shell of the building was completed in fall 2015 and the building sale
was recorded on February 24 as FedEx took occupancy following the installation of
package sortation infrastructure. Chicago-based aggregator Brennan Investment Group
acquired the 119,040, square-foot Bradley Commerce Center from Complete
Warehouse & Distribution for $5.25 million. The multitenant building has 45,000 square
feet of available space. Another Chicago-based investor, AIC Ventures, acquired a fully
leased 78,000-square-foot single-tenant building at 4700 N 129th Street in Butler from
National Equity Trust for $4.6 million. The building is fully occupied by MacArthur Corp,
which utilizes the abundant outdoor yard space for storage and distribution of building
products.
5.0%
Total vacancy
8.0%
Total availability
235,445
149,156
12-month employment growth
Avg. weekly hours
4.0%
+3.1%
3.0%
2.0%
1.0%
Avg. hourly earnings
0.0%
-1.0%
Mining
Construction Manufacturing Trade, Trans,
Utilities
-2.7%
Source: BLS, MMAC
Notable leases
Address
Size (s.f.)
Transaction
type
5475 S Westridge Court, New Berlin
82,387
New lease
11311 W Forest Home Avenue, Franklin
67,544
New lease
29605 Hwy 16, Oconomowoc
50,000
New lease
Source: Xceligent
Notable investment sales
Address
Size (s.f.)
Price per s.f.
County Line Road, Menomonee Falls
200,000
$99.50
8301 W Parkland Court, Milwaukee
119,040
$44.14
4700 N. 129th Street, Butler
78,000
$58.97
Source: Real Capital Analytics
$8.08
447,234
Asking rent (p.s.f.)
3.9%
Quarterly rent growth
40.3 M
39
Bulk warehouse space is getting leased … in bulk
Leasing activity overview
Unusually large absorption of over 1.0 million square feet of bulk space was
recorded in the first quarter of 2016 due to a normalization of tenant demand and
newly delivered space from the end of 2015 being well-received. Although office
showroom and warehouse and distribution space experienced some negative
absorption, strong absorption through the rest of 2016 is to be expected in flex
and distribution facility types as well.
15.0%
Sales overview
Early 2016 saw a healthy amount of portfolio sales with an 11-building
transaction still pending. Minneapolis-based Talon Real Estate is in the process
of purchasing nearly all flex buildings from Connecticut-based Greenfield
Acquisition Partners for a sum of $81.0 million (averaging about $96.00 per
square foot). Among completed non-portfolio sales, the total year-to-date value is
nearly $164.0 million. The bulk of the inventory that sold is Class B warehouse
and distribution space.
8.3%
10,540,415
Total vacant (s.f.)
2,811,277
2.1%
Bottoming
market
Rising
Northwest
Total vacancy by submarket
While the quarter saw some strong leasing activity, large newly built warehouse
and distribution facilities like CSM Corporation’s North Star Distribution in Rogers
and Liberty’s Dayton Distribution Center I remain fully vacant. Regardless,
brokers are confident about leasing prospects in the I-94/169 corridor as the
second quarter and warmer weather approach.
Total vacancy rate
Falling
market
Southwest
market
Southeast
Northeast
East
Bulk warehouse leasing highlights include transportation-service leader Ruan at
Kinghorn Logistics Hub; cleaning equipment manufacturer Nilfisk at North Cross
Business Park Building 2; automobile tire supplier Tire Rack at 3075 Long Lake
Road; and distributor Bunzl at the Ultra Pac Building. All of the above occurred in
either the Northwest or Northeast submarkets, speaking to their advantageous
proximity to Minneapolis and St. Paul firms and easy interstate access.
The City of Minneapolis closed on its acquisition of the Roof Depot Distribution
Center in February, one of the largest industrial sale footprints year-to-date. The
property, a 7.6-acre site at 1860 28th Street East, sold for $6.8 million. The city
plans to relocate its Department of Public Works to the location.
Peaking
market
Tenant leverage
Landlord leverage
Property clock, by submarket
10.0%
Q4 2015
10.5% 11.2%
9.4% 8.3%
Q1 2016
7.5%
6.9% 6.3%
5.0%
1.9%
0.0%
NW
SW
SE
6.9%
3.3%
E
NE
12-month change in industrial employment, Jan–Dec 2015
Manufacturing
15.0
Other Services
10.0
5.0
0.0
-5.0
Source: BLS
*job change in thousands
$6.79
Average rental rate (p.s.f.)
$57.43
Average sales price (p.s.f.)
1,985,326
3,244,105
40
Nashville
Strong market conditions continue
The vacancy rate and asking rate correlation continues
Even with the increase in speculative construction deliveries, vacancy rates
continue to trend down. Nearly every industrial submarket is showing vacancy
rates below 6.0 percent, with some dropping below 4.0 percent and even 2.0
percent, in the case of the East Industrial submarket. Asking rental rates
continue to rise as the vacancy rate drops. With the exception of the bulk product,
nearly all classes of industrial inventory are above asking rates of $4.00 NNN,
with rates approaching $6.00 to $7.00 NNN in the IBD, East and Southwest
submarkets.
Total vacancy
s.f.
More speculative development announced and under way
Panattoni continues to lead the pack for speculative development with close to
2.0 million square feet under construction between CentrePointe Distribution
Park and Skyline Distribution Park. Huntington Industrial is under way with
172,000 square feet to deliver next quarter at Southpark Business Center.
Clarion announced that it will soon start on 144,000 square feet at Three Oaks.
Holladay Properties announced that it will begin the first phase of a 90-acre
development by Nashville International Airport, starting with approximately
200,000 square feet. It could potentially deliver approximately 750,000 square
feet in all.
Completions
6,000,000
Net absorption
4,000,000
2,000,000
0
-2,000,000
2010
2011
2012
2013
2014
2015
YTD
2016
-4,000,000
Prologis fills up fast
The first Class A industrial speculative development to break ground in 2015 was
a two-building development in the Southeast submarket by Prologis, which
included 148,050 square feet and 151,200 square feet, respectively, named
CentrePointe 3 & 4. As of this report’s writing, Prologis successfully preleased
the entire development prior to delivery to three tenants: Streetside Classics,
Interline Brands and Veritiv Corporation.
15.0%
10.0%
11.0%
10.4%
5.0%
0.0%
2010
2011
9.2%
2012
8.4%
7.0%
2013
2014
6.2%
5.2%
2015 YTD 2016
Notable leases
Tenant name
Deal type
Size (s.f.)
Hill’s Pet Nutrition
Renewal
204,912
Veritiv Corporation
New
151,200
Interline Brands, Inc.
New
98,700
203,349
83.1%
YTD completions leased
5.2%
Total vacancy
-160 bps
$4.10
+13.3%
2,413,425
66.1%
Total preleased
41
New Jersey
Stout industrial demand drives vacancy lower
Class A leasing activity in high gear
With vacancy falling to 5.9 percent in Northern and Central New Jersey, big-box
leasing activity remained in high gear at the end of the first quarter. Leasing
activity on Class A quality assets saw continued strength as tenants sought out
newer and higher clear-height facilities. Further expanding in the Exit 12
submarket, Amazon signed a lease with Prologis for 809,762 square feet at 380
Middlesex Avenue in Carteret, bringing its total footprint in the submarket to 2.9
million square feet. As result of this fervent Class A leasing activity, developers
continue to break ground on speculative projects around the state to meet the
demand. More than 2.9 million square feet was under construction at the end of
the first quarter, with more than 1.0 million square feet expected to break ground
in the second quarter.
Class A leasing activity
Industrial construction activity continues to escalate
Fueled by Class A leasing activity and intensifying industrial demand,
construction across all size segments has amplified in 2016 as developer
optimism continues to increase. Most notably, Bridge Development Partners
broke ground on another of its speculative development projects. The 488,800square-foot facility located in South Brunswick broke ground at the beginning of
the year and is expected to be delivered before the end of 2016. River Terminal
Development also began construction of a 189,000-square-foot speculative
project within the Port submarket, where the vacancy rates had plummeted 260
basis points over the past 24 months.
Construction activity
Morris County industrial benefits from improving demand
As a result of fervent demand for industrial product across Northern New Jersey,
vacancies in many secondary industrial markets had fallen near their all-time
lows. During 2015, the Morris County industrial submarket, which is made up of
37.5 million square feet of industrial space, had bucked the trend with vacancy
remaining near 8.5 percent. However, a flurry of leasing activity late last year
resulted in a wave of net absorption, which drove the submarket’s vacancy rate
below 7.0 percent for the first time since the Great Recession. Contributing to
Morris County’s performance this year was 1 Cory Road in Morristown and 35
Melanie Lane in Whippany, where more than 150,000 square feet was absorbed
in the first quarter of 2016, representing more than 25.0 percent of the
submarket’s absorption for the year.
618,211,091
Total market size (s.f.)
5.9%
Total vacancy
2,911,886
1,853,563
Speculative construction (s.f.)
Tenant name
Deal type
Size (s.f.)
Amazon
New
809,762
Fabuwood
New
706,083
FedEx Smartpost
New
695,000
Blue Apron
New
494,395
# of blocks
20
Completed projects
Expected to break ground in 2016
Under construction
8
15
10
1
5
6
0
4
10
<100,000 s.f.
1
4
1
100,000-500,000 s.f.
>500,000 s.f.
Morris County vacancy rate
11.0%
9.0%
7.0%
8.9%
8.1%
8.5%
9.0%
6.7%
5.0%
3.0%
2012
2013
1,351,145
1,342,629
2014
2015
YTD 2016
$6.76
NNJ average asking rent (p.s.f.)
$5.15
CNJ average asking rent (p.s.f.)
42
North Bay
Tenants and developers seeking out the North Bay
Overflow of Bay Area tenant demand continues to strengthen North Bay’s
industrial market
The spillover of tenant demand from peripheral Bay Area markets continues to
fuel activity in the North Bay. Demand for industrial space is high, with about 3.9
million square feet of active requirements targeting the market. Additionally,
institutional buyers are increasingly taking notice of the area, a major shift for a
market that has historically consisted of almost entirely local/regional developers
and tenants. Vacancy has been declining since 2009 and currently sits at 3.7
percent overall, comparable to the 3.8 percent at year-end 2015.
North Bay historical vacancy rates (%)
15.0%
Vacancy rate
10.0%
3.7%
5.0%
0.0%
2007
2008
2009
2010
2011
2012
2013
2014
2015
YTD
2016
Tenant demand drives development activity
The increased tenant demand and tightened availability has driven major
development opportunities in the region. The Napa Valley Logistics Center in
American Canyon delivered this quarter, consisting of 646,000 square feet of
warehouse and distribution space. Although the space is not yet leased, the
facility has attracted substantial tenant interest and will likely be fully leased by
next quarter. Currently, there is an estimated 6.0 million square feet of proposed
projects in the pipeline, a testament to developers’ optimism about the market,
all of which is concentrated in Napa and Solano Counties.
Tenant demand for space in the North Bay (s.f.)
Range in rental rates can be attributed to unique submarket industries
Industrial activity in the North Bay can be characterized by a range of core
industries, unique to each submarket. While the wine industry dominates
industrial activity in Napa County, spinoff industries such as food and beverage
and cork suppliers locate nearby. The market’s monthly average asking rent
was $0.45 per square foot overall, although insulated and conditioned space in
the Napa and Sonoma submarkets are notably higher than those in Solano—
$0.69 and $0.87 per square foot compared with $0.41 per square foot,
respectively. Meanwhile, Marin County is a tertiary industrial submarket
consisting of smaller spaces that are often blended with retail services. Recently,
e-commerce has started to grow roots in Solano County, further diversifying the
market’s drivers.
$0.45
North Bay avg. asking warehouse rent (p.s.f.)
3.7%
North Bay overall vacancy
3,937,500 s.f.
Active requirements
North Bay market inventory (s.f.)
70,000,000
60,000,000
50,000,000
40,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
61,458,641
North Bay inventory (s.f.)
6.0%
North Bay overall availability
646,000
128,758
Industrial product under construction (s.f.)
43
Orange County
Market fundamentals grow to start 2016
Rental rates inch closer to the market peak
From 2011 through 2015, Orange County recorded five consecutive years of
positive net absorption. This trend continued in the first quarter of 2016, with the
market experiencing 495,534 square feet in occupancy gains. Due to the positive
demand for space and lack of quality, available space, market-wide average
asking rental rates are heading toward the market peak level reached in mid2008. In several cases, rental rates for Class A properties have already met or
exceeded peak pricing, with landlords and tenants understanding there is a lack
of space alternatives.
Rental rate appreciation, year-over-year
Vacancy reaches record low
Continued competition among industrial users pushed vacancy down 20 basis
points in the first quarter to 1.5 percent, with Orange County remaining one of the
tightest markets in the nation. Vacancy declined 100 basis points over the last 12
months and has dropped 410 basis points since the end of 2010. Despite the
delivery of new buildings to the market, supply is unable to keep up with tenant
demand. As business operations change, a greater number of tenants are
bifurcating operations to separate logistical space from manufacturing assembly
and corporate office functions.
Vacancy rates, year-over-year
20.0%
10.0%
0.0%
10.8%
1.4%
-10.0%
-20.0%
2007
2008
-1.9%
-13.7% -14.3%
2009 2010 2011
1.9%
2012
7.4%
6.9%
8.1% 10.0%
2013
2014
2015
YTD 2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
0.0%
1.5%
1.7%
3.0%
3.4%
4.3%
4.5%
5.6%
5.6%
3.2%
2.9%
1.0%
2.0%
3.0%
4.0%
YTD
2016
5.0%
6.0%
The bigger picture
Orange County is a constrained infill industrial market with demand considerably
outpacing supply. Strong economic growth is putting pressure on companies to
keep up with client demand. In order to accomplish this feat, businesses are
continuing to innovate manufacturing, fulfillment and logistical processes. Firms
from the consumer goods industry as well as food & beverage have been
particularly active in the market. In 2016, locating available space will remain a
challenge as many tenants elect to sign early renewals.
Notable leases
Tenant name
Deal type
Size (s.f.)
C&D Zodiac
New
280,460
L&L Foods Holdings
New
207,074
Brentwood Home, LLC
New
156,096
278,365,806
Inventory with flex (s.f.)
1.5%
Total vacancy
3,145,000
1,241,668
539,907
YTD construction completion (s.f.)
100%
Spec construction (% of comp.)
0
0%
Total preleased
44
Orlando
Vacancy reaches an eight-year low given strong market
Location supports Orlando as a local logistics and distribution hub
Orlando’s centralized location within the state provides a competitive advantage,
in terms of logistics and distribution, as it supports efficiency in quicker
transportation to the growing consumer base. Given these strategic advantages
for Orlando, logistics and distribution firms are increasing activity in the market
with over 19.2 percent of leases signed this quarter—a significant increase from
last year’s figure of 6.8 percent of total leasing activity. The outlook for continued
leasing of logistics and distribution tenants remains strong, especially with the
development of the Intermodal Logistics Center in Winter Haven, which features
7.9 million square feet of planned distribution space.
User industry types show logistics firms as leading occupier
17.8%
3.2%
Retailers/wholesalers
31.1%
Logistics and distribution
Manufacturing
21.0%
Business services
26.8%
Agri/mining/utilities
Hotel-related users will intensify warehouse demand
This year, employment in the leisure and hospitality industry increased 5.5
Hotel-supporting industries’ recent lease transactions
percent, with a 9.1 percent increase in the food service industry during that same
Tenant
Location
Square feet
time period. Employment growth in this industry stems from the strong occupancy
rate, which increased 3.3 percent year-over-year to 75.7 percent. With 26 hotels
Mattress Firm
Southeast Orange
154,700
in the pipeline, Orlando’s hotel market is expected to increase 3.0 percent within
two years. This will directly impact the local warehouse market as tenants such
Sherwood Southeast
Southeast Orange
154,700
as hotel linen suppliers, construction firms, and maintenance supporting
companies in the hotel supply chain will provide an increase in demand for
Hotelier Linen Services
Southeast Orange
51,400
warehouse spaces especially in South Orlando.
Vacancy rate (%)
Tightening vacancy caused by long-term demand and lack of inventory
This quarter, vacancy reached an eight-year low at 7.5 percent, a 50 basis point
Recent leasing activity supports dropping vacancy rate
drop quarter-over-quarter and a 70 basis point drop year-over-year. Despite a
slower quarter, in terms of leasing activity, over the past year, the amount of
Leasing activity (s.f.)
Vacant percent total
space leased increased by 40.0 percent year-over-year, with that figure nearly
15.0%
2,500,000
doubling in more active submarkets like Southeast Orange. As new-to-market
2,000,000
10.0%
1,500,000
firms like e-commerce tenants, who are attracted to the growing customer base,
1,000,000
5.0%
locate to Orlando, the supply of space becomes more constrained. Additionally,
500,000
these firms require updated warehouse features such as ESFR sprinklers and
0
0.0%
higher clear heights, intensifying demand within new product warehouse spaces.
2014 2014 2014 2014 2015 2015 2015 2015 2016
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
The vacancy rate is projected to continue to drop as demand grows given the lack
of inventory in the market.
0.7%
YTD net absorption (as % of stock)
7.5%
Total vacancy
2,885,000
7,150,800
794,000
Quarterly leasing activity (s.f.)
52
Total quarterly deals
1,358,846
78.8%
Total preleased
45
Palm Beach
Palm Beach County continues strengthening
Rent growth continues in the market
The market has experienced strong rent growth, and rents have reached record
high levels. Rents have consistently risen since the middle of 2015 and are up
2.5 percent year-over-year. This is despite a 20 basis point increase in vacancy
from year-end 2015. Regardless, vacancy has trended downward over the longer
term and is down 210 basis points since the start of 2014. The strongest rent
growth occurred in the North Palm Beach submarket, where rents have grown
nearly 7.0 percent year-over-year.
Absorption streak continues in the first quarter of 2016
1,500.0
1,000.0
500.0
0.0
(500.0)
(1,000.0)
(1,500.0)
(jobs in thousands)
Palm Beach County starts 2016 on a positive note
In 2015, absorption increased 59.6 percent compared to the previous year, as
tenants took occupancy of over 1.1 million square feet of space, the highest level
in over 10 years. The start to 2016 continued the positive absorption trend, as
tenants took occupancy of nearly 150,000 square feet, much of which occurred
in the West Palm Beach submarket. The market has experienced 17 consecutive
quarters of positive absorption. Still, vacancy ticked upward slightly due to the
delivery of speculative projects, which is a good sign of developers having
confidence in the market after near-stagnant development in the previous
five years.
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
Despite slight uptick in vacancy, rents continue to rise
Direct average rate
$8.50
Total vacancy
8.0%
$8.00
6.0%
$7.50
4.0%
$7.00
2.0%
$6.50
2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
0.0%
5.0%
Total vacancy
8.0%
Total availability
235,445
149,156
Sales volume continues increasing amid improving market
Millions
Market sees robust sales volume to start the year
Following an eight-year high for sales in 2015, which saw nearly $150 million in
property trades, this year started with over $83 million in transaction activity,
putting 2016 on track to surpass last year’s high. A good deal of this volume was
included in portfolio sales. Nearly 20.0 percent of all transaction volume occurred
when Prologis sold a 19-property portfolio to Adler Kawa Real Estate Advisors.
The increased sales activity, similar to the return of industrial development in
Palm Beach County, is a positive sign for the market’s improvement going
forward in 2016.
$300
$200
$100
$0
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
$8.08
447,234
3.9%
40.3 million
Quarterly rent growth
46
Philadelphia / Central Pennsylvania
Developers focus on Philadelphia’s prime locations
Speculative development activity accelerates
Construction activity continues to be one of the prime drivers of the Philadelphia
industrial market. Availabilities and vacancies are at all-time lows, encouraging
speculative construction to address the needs of 28,495,000 square feet of
active tenant requirements. Speculative construction accounted for 82.0 percent
of all construction activity in the fourth quarter in 2015 but has declined to 63.1
percent due to several new deliveries. We anticipate that speculative activity will
continue to lead the market in comparison to build-to-suits, as 10.4 million
square feet of speculative construction is expected to break ground in the next
12 months. While demand continues to be strong, a large volume of construction
has delivered vacant this year (81.5 percent), likely causing market conditions to
shift to tenant favorable by 2018 due to the large increase of Class A inventory in
the market.
Vacancy slightly declines in Q1, market lows return
10.0%
9.5%
9.0%
9.5%
8.5%
8.9%
8.0%
7.5%
2010
2011
9.0%
2012
8.7%
2013
8.4%
8.5%
2014
2015
8.3%
YTD
2016
Available space (% of inventory)
16.0%
Landlords push rents higher
New construction continues to deliver at peak asking rates. The average asking
rate at the seven speculative buildings delivering in the market so far this year is
$4.68 per square foot. Landlords are confident that strong demand will continue
to keep the market competitive for well-located, high-quality product in the next
12 months, particularly as total tenant requirements increased 21.0 percent since
the end of last quarter. There is anticipation that rents will start to level off as
early as 2017 due to the large volume of speculative construction.
Difficult entry to market
New construction has created opportunities for outside investors in a market that
has otherwise been difficult to enter. While 22,844,345 square feet of deliveries
and active construction have occurred in Central PA and the Lehigh Valley since
2015, planned construction indicates that the I-81 Corridor will see new
momentum as outside investors capitalize on opportunities to develop on welllocated sites. Notable investment sales in the quarter include Bentall Kennedy’s
purchase of 103 Commerce Drive, a 247,401-square-foot distribution warehouse
that sold for $24 million and AEW Capital Management’s purchase of a 785,400square-foot warehouse at 325 S Salem Church Road for $60 million.
104,261,665
Available (s.f.)
8.3%
Vacancy
28,495,000
25,544,096
15.0%
14.0%
13.0%
12.0%
11.0%
2010
2011
2012
2013
2014
2015
YTD 2016
Notable leases
Tenant name
Deal type
Size (s.f.)
Amazon
New
613,920
Samsung Electronics
New
500,400
Behr Paints
New
241,852
Ready-Pac
Renewal
154,675
74.5% vs. 25.5%
Spec construction vs. design-builds
$4.65
Class A asking rent (p.s.f.)
13,255,376
36.9%
Total preleased
47
Phoenix
Balanced growth continues into the new year
Construction-related companies lead charge of midsized users
Although Phoenix has recovered all of the jobs lost during the recession, the
construction employment sector is still more than 80,000 jobs away from its
previous peak. Construction-related companies represented a significant portion
of midsized activity in the market, but unlike previous cycles, economic recovery
is not dependent on the success of single-family construction. An impressive
7,200 construction jobs have been added since the first quarter of 2015, and as
multifamily and commercial construction continue to grow in the Phoenix metro
area, new employment growth in the construction sector is expected to translate
into healthy absorption gains.
Historical Q1 Phoenix metro construction employment
Balanced recovery in the Southeast Valley with small user activity
During previous economic cycles in the Phoenix market, recoveries were marked
by large, institutional users taking advantage of declining rental rates to lease
large blocks of space. Now that the worst of the recession is well behind us, the
Southeast Valley has seen a much more balanced recovery, including large,
midsized, and small, local users. Over 1.0 million square feet of leases were
signed in the first quarter, and with only a few renewals over 100,000 square feet,
leasing activity in the first quarter was largely composed of small deals under
5,000 square feet.
Southeast Valley leasing activity
Southwest Valley landlords optimistic that large users will land in 2016
After averaging nearly 675,000 square feet of net absorption per quarter in 2015,
the Southwest Valley saw a healthy bump in the first quarter of 2016, recording
over 830,000 square feet of net absorption. Institutional users have always
looked to the Southwest Valley for big-box space that meets regional distribution
needs, and there are currently over 13.0 million square feet of tenants in the
market evaluating, touring or negotiating for space in the submarket. With plenty
of existing large blocks of space still available in addition to ample land for
development, landlords are confident that the dominoes will begin to fall.
Southwest Valley tenants in the market
9.7%
Total vacancy
12.3%
Total availability
1,782,895
Q1 total absorption (s.f.)
2,500,050
125,000
100,000
75,000
2011
2012
2013
2014
2015
2016
Source: Bureau of Labor Statistics
Of all leases signed in the
Southeast Valley in the first
quarter of 2016, more than threequarters of the deals were less
than 5,000 square feet.
77%
Tenant name
Deal type
Size (s.f.)
Project Eagle
Multimarket
800,000
Project Oak
BTS/Purchase
700,000
Project Redwood
Multimarket
600,000
2,011,826
Total construction completions (s.f.)
56.0% vs. 44.0%
2,399,171
38.8%
Total preleased
48
Pittsburgh
Developers and investors are bullish on Pittsburgh
Capital markets activity
Sales volume
$60
Total sales volume ($M)
$50
$20
$25
$0
$0
Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016
Development pipeline (m.s.f.)
Rents hold near $5.00 p.s.f. while availability records further declines
Despite the presence of some headwinds at the national and regional levels, the
Pittsburgh industrial market continues to tighten. The average asking rent at the
end of the first quarter stood at $4.91 per square foot, relatively unchanged yearover-year. Meanwhile, availability decreased to 10.8 percent, down 41 basis
points year-over-year. Availability in the Class A product type remains incredibly
tight, in the sub 5.0 percent range. While some spec construction is currently
under way and will provide additional options for tenants, market conditions will
remain landlord-favorable into 2017.
Market rents and availability
10.8%
Total availability
636,038
0.5%
$75
$40
Developers hear the call for new product, fill pipeline with spec projects
Construction activity remained elevated into the first quarter with over 1.5 million
square feet of industrial product under construction. Developers are bullish on
the market, with several speculative projects currently under way. Notable spec
projects include Ashley Capital’s 316,000-square-foot development in the Findlay
Commerce Center and Al. Neyer’s 252,000-square-foot development in the
Clinton Commerce Park. While both projects have yet to secure a tenant, they
have garnered interest from large users and are projected to have leases in
place before the end of the year.
14,640,411
Average sales price ($/s.f.)
Under construction
1.8
Average price
Investment sales top headlines in the first quarter
Sales volume swelled in the first quarter on the back of several high-profile
trades. Capital markets activity totaled more than $55.3 million, a noticeable
increase from prior quarters. The largest trade of the quarter was Monmouth
Real Estate Investment Corporation’s acquisition of the 125,860-square-foot
General Electric global research center for additive manufacturing in Imperial,
Pennsylvania. Monmouth purchased the property for $20.0 million, or $159 per
square foot. The new structure sits on 34 acres, is expandable by another 90,000
square feet, and is net-leased to GE for 10 years.
Deliveries
1.2
0.6
0
2011
2012
$5.20
2013
2014
Asking rent ($ p.s.f.)
2015
Q1 2016
Availability (%)
16.0%
$4.80
14.0%
$4.40
12.0%
$4.00
2011
2012
$4.91
2013
YTD total average asking rent (p.s.f.)
-0.8%
2014
2015
Q1 2016
10.0%
1,526,000
50,000
49
Portland
Strong demand, supply struggling to catch up
New market entrants continue to push vacancy rates to new lows
Portland is catching the eye of national and international companies. The need for Market vacancy
same-day/next-day shipping and the favorable geographic location of Portland
10.0%
means that Portland is perfectly situated for companies wanting to distribute
8.0%
throughout the Pacific Northwest. First quarter saw Bunzl, OnTrac and Logistic
6.0%
Insights Corp all sign new leases in excess of 100,000 square feet. As these large
6.8%
5.9%
4.0%
corporations establish and consolidate their distribution footprint in Portland,
vacancy rates continue to drop, with Portland’s first quarter vacancy setting
2.0%
another record low of 3.6 percent.
9.1% 9.2%
6.7%
8.6%
7.4%
5.6%
4.6%
3.8% 3.6%
0.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 16
Deliveries take a breather, construction is still expanding
Deliveries of new buildings eased off of the market highs of the previous two
quarters, seeing six new facilities and one renovated building deliver. These new
New construction deliveries (s.f.) and % leased
deliveries represent 290,332 square feet of new warehouse & distribution space
being added to the market, down 1,119,663 square feet from last quarter. Despite 3,000,000
72%
61%
61%
the first quarter’s lull, the rest of 2016 is expected to deliver a buoyant 2,200,278
2,400,000
51%
square feet. Additionally, the amount of space leased on delivery rose to 71.9
1,800,000
percent in the first quarter of 2016. Preleasing on under construction space
1,200,000
currently stands at 51.4 percent.
80.0%
60.0%
40.0%
20.0%
600,000
0
2013
2014
USPS Colwood deal is a market mover
Source: Thomson Reuters, JLL Research
The recent purchase of 47.5 acres of the former Colwood golf course – for the
new 789,837-square-foot U.S. Postal Service’s mail distribution center – is
reshaping the market. After negotiating an $88 million deal for USPS’s current
distribution center in Portland’s Pearl District, the city was hard pressed to find an Notable leases
alternative site for a new mail distribution center. The City of Portland negotiated a Tenant name
price of $34.7 million for the Colwood property. The effect on the general industrial
Bunzl
property market is noticeable, and the deal has taken this prime industrial
development out of the market. Developers holding more challenging sites are
OnTrac
now proceeding with their entitlement process in an effort to get product to the
Logistics Insight Corp (LINC)
market. Developers, who may have waited for a build-to-suit tenant in previous
cycles, are showing a willingness to move forward on speculative projects to
capture tenant demand.
11,898,716
Available for lease (s.f.)
3.6%
Total vacancy
3,373,000
290,332
New construction deliveries (s.f.)
61.5% vs. 38.5%
$77.96
Average sale price (p.s.f.)
2015
0.0%
Q1 16
Deal type
Size (s.f.)
Direct
190,600
Direct
162,000
Direct
105,535
2,503,638
50.3%
Total preleased
50
Reno / Sparks
Reno market stagnant in the first quarter
0%
9.6%
Total vacancy
+240 bps
Vacancy is up from one year ago
2,000,000
1,000,000
0
2010
-1,000,000
2011
2012
2013
2014
2015
YTD
2016
Total vacancy
15.0%
13.0%
13.3%
11.2%
7.0%
10.1%
5.0%
More spec projects announced, planned
Two developers, Panattoni and McKenzie, have announced spec projects to
accommodate smaller (less than 50,000 square feet) users. The projects should
deliver by the fourth quarter, and we expect them to be successful and leasedup quickly.
Net absorption
3,000,000
9.0%
Landlords are not inclined to offer incentives or discount rent, based on present
building activity. Currently, only three spaces in excess of 500,000 square feet
are available and there are ongoing, active negotiations that may take them off of
the market soon. There are only nine availabilities in the smaller 75,000- to
150,000-square-foot segment, and just five in excess of 250,000 square feet.
200,000
Completions
4,000,000
11.0%
Rents firm and increasing
The chart to the right shows increasing vacancy, but this is due to new
speculative deliveries. We expect the vacancy rate to move downward in the
next few quarters.
(s.f.)
Market growing while statistics remain flat
The Reno market was fairly flat in the first quarter. While several large
construction projects are under way, such as Tesla’s 5.5 million-square-foot
manufacturing facility, Dermody’s project in the North Valley’s market as well
and Switch’s “Supernap” of 987,064 square feet, there was not a great deal of
activity. Leasing activity was flat. There are several large tenants in the market,
and it remains to be seen whether any leases will be signed. Panattoni has
completed its new 700,000-square-foot facility and we believe is about to
announce the preleasing of two 350,000-square-foot buildings on the same site.
There are plenty of available sites for development, meaning Reno is not running
out of options to deliver new supply. While Tesla and Switch have purchased
large sites in the Tahoe Reno Industrial Center, there are virtually limitless
options in that area as well as Fernley, farther east. When USA Parkway is
completed, this north/south connector from the State 50 Highway to Interstate 80
will provide better access and open new areas to development.
2010
2011
2012
9.6%
9.3%
9.1%
7.5%
2013
2014
2015 YTD 2016
Notable leases
Tenant name
Deal type
Size (s.f.)
Jardin
New
278,000
Chewy.com
New
566,000
jet.com
New
160,000
$4.09
+1.7%
7,716,710
77.3%
Total preleased
51
Richmond
Speculative development resurfaces in 2016
Speculative development returns after a 12-month hiatus
After Becknell Development purchased 2500 Distribution Drive and three
neighboring pad sites in the second quarter of 2014, the developer broke ground
on one speculative distribution building this year. Totaling 216,000 square feet, it
will be the second speculative development in the Richmond market since
Liberty Property Trust delivered East Port VIII in the first quarter of 2015, which
remained 30.0 percent leased to date. One advantage of Becknell’s project is the
pricing; starting at $4.25 per square foot, triple net, it is below the average asking
rental rate for existing Class A space ($4.70 per square foot, triple net).
Richmond historical development
Additional speculative development pending into 2016
There are three existing large blocks of space greater than 100,000 square feet
available in the Richmond market. Two are located in Class B buildings and one
in a Class A building off the southern I-95 Corridor. Additionally, there is another
Class A block under construction, due to the reemergence of speculative
development—the second project in the past five years. Due to space
constraints, Class A rents for existing product are rising and approaching levels
of new construction, which should augment future development.
Richmond’s inventory of contiguous blocks (>25,000 s.f.)
BTS
(s.f. in millions)
1.8
1.0
0.1
6
83,254,858
7.2%
Direct vacancy
472,790
11.3%
Total availability
0.6
0.5
Average block size:
71,377 s.f.
2013
2014
Average block size:
91,871 s.f.
4
2015
2016
Existing
Under construction
Average block size:
176,850 s.f.
2
0
I-95/I-295/Rt 10
Increased e-commerce and grocer demand set to inflate supply pipeline
Lidl, Aldi, Publix and Wegmans have recently entered the market, creating
demand for big-box distribution centers to service these new locations. The most
recent announcement was Harris Teeter’s decision to build a distribution center
in Caroline County. The 1.5 million square-foot facility will service both the
Northern Virginia and Hampton Roads stores and should deliver by 2017.
Additionally, as retailers' business models have shifted to service growing ecommerce demand, so have their real estate footprints. The need for larger
fulfillment centers near high-density population hubs has drawn interest in
Richmond's land base to construct these new facilities.
Speculative
2.0
2011
2012
# of blocks
Owner-user
East End/Airport
Laburnum/360
Grocer/E-commerce requirements over the past 12 months
3.6 million
square feet
$3.73 NNN
Overall direct avg. asking rent (p.s.f.)
$4.70 NNN
Class A direct avg. asking rent (p.s.f.)
0
0%
Total preleased
52
Sacramento
Limited supply and lack of new construction continue to drive down vacancy
New developments and deliveries
Three buildings in Elk Grove delivered 49,250 square feet of light industrial
space this quarter, raising the number of newly constructed buildings to 12,
since the beginning of 2014. The Southport area of the West Sacramento
submarket has been a hot spot for development, encompassing 46.9 percent of
these deliveries; its accessibility to I-5, I-80, Hwy 50, and Hwy 99, in addition to
its access to labor, make it an attractive location. Historically, high costs and
development fees have been barriers for new construction in the market,
although the 3.4 million square feet of proposed development in the pipeline
indicate a potential shift away from this previous trend.
Favorable financing rates continue to drive buying activity
Competition in primary markets such as the Bay Area and Los Angeles have
prompted investors to seek opportunities in Sacramento. As landlords have yet
to pull back from selling, sales continue to rise. The recent passage of an
ordinance allowing cannabis cultivation in the City of Sacramento has inundated
the market with purchase requirements. Most of these target Power Inn since
the submarket meets the City’s requirements for the size and location of
cannabis cultivation facilities. Although 2016 is an election year, pent-up
demand allows for a cautiously optimistic forecast, with investment activity
remaining steady over the next six months.
$0.40
404,619
inventory (includes Class A & B-caliber inventory)
20
# of blocks
Tenants face limited options across all size ranges
Users seeking modern bulk distribution space face a supply-constrained
landscape with few existing alternatives across Sacramento. Currently, there
are only three options above 250,000 square feet available for lease and no
new supply of this size under construction. Tenant demand, predominantly from
the distribution and logistics industry, is notable in the 100,000- to 150,000square-foot range. Additionally, the heavy equipment rental industry’s growing
footprint contributes to the increasing number of small users facing a lack of
supply. High costs and fees for development in the Sacramento market
contribute to a lack of needed development. This absence, along with limited
space, is creating a landlord’s market.
Existing
15
10
18
5
0
3
100,000 - 249,999 s.f. 250,000 - 499,999 s.f.
Vacancy rates by submarket
Auburn/Lincoln
West Sacramento
Northgate
Sunrise Ind
Woodland Ind
NE Sacramento
Roseville/Rocklin
Elk Grove/Laguna
Power Inn
McClellan
Folsom/El Dorado
Richards
South Sacramento
Downtown
9.3%
9.0%
8.4%
7.6%
7.3%
7.1%
6.9%
5.3%
4.4%
4.0%
3.4%
2.2%
0.0%
5.0%
10.0%
19.6%
11.6%
Overall
vacancy rate
is 9.4 percent
15.0%
20.0%
25.0%
Average sale pricing
$57.05 p.s.f.
Average sale price for industrial
assets during the first quarter
3,325,000
3
49,250
9
Quarterly const. completions (s.f.)
> 500,000 s.f.
Average asking rate (p.s.f., mo.)
# of quarterly const. completions
Under construction
36,455
$0.33
Existing blocks of space 250 ksf+
Warehouse and distribution asking
rental rate (p.s.f.)
53
Salt Lake City
The crossroads of the West
Tenants want modern, functional and efficient space
Tenant requirements and distribution/retail channel shifts are demanding tailored
building specifications. This has resulted in an optimistic outlook for industrial
development within Utah. Investor confidence is at a record high, with major
developers having staked their land positions. Tenants below 50,000 square feet
will start to find space that meets their needs as new product is now focused on
medium distribution users.
Outlook
Construction is expected to continue leading market activity, due in part to
comparative replacement costs, functional obsolescence and tightening Class A
availabilities. Construction levels in 2016 are not anticipated to match 2015’s
record totals. However, we do expect to see approximately 2.1 million square
feet delivered by the third quarter of 2016. Expect vacancy rates to slightly
increase, while lease rates will flatten until the new speculative projects become
stabilized.
Leasing volumes will continue to accelerate in 2016 as confidence strengthens
and tenants seek to modernize their warehouse facilities. Investment sales
activity is at its peak since the recession, which will continue during 2016. The
challenge is finding product to purchase. This will create a compression on cap
rates. Cap rates could dip below 6.0 percent.
Growth will remain steady with manufacturing, composites, aerospace and
e-commerce occupiers.
683,820
YTD completions (s.f.)
0%
YTD completions leased
5.0%
Total vacancy
+60 bps
s.f.
The Salt Lake market continues to prove it’s a premier distribution hub
A number of users either made new or renewed long-term commitments to Utah.
However, there is minimal industrial land remaining within the Salt Lake Valley:
The Great Salt Lake to the west and the Wasatch Mountains to the east limit the
amount of land that can be developed.
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
Completions
2010
2011
2012
Net absorption
2013
2014
2015
YTD
2016
Total vacancy
7.0%
6.0%
5.0%
4.0%
3.0%
5.5%
2010
4.8%
2011
5.4%
2012
5.0%
4.0%
4.4%
4.6%
2013
2014
2015 YTD 2016
Notable leases
Tenant name
Deal type
Size (s.f.)
Sephora USA, Inc.
New
100,000
South Shore USA
New
87,745
Select Comfort Corporation
New
79,500
$4.96
+5.1%
1,461,166
44.2%
Total preleased
54
San Antonio
Continuation of growth
Average rental rates up 0.2% year-over-year
With decreased vacancy, strong absorption and an increase in preleased activity,
the first quarter of 2016 has seen asking rent increase by 0.2 percent year over
year, and a 0.4 percent increase from the fourth quarter of 2015. Despite the
small uptick in rents, the market continues to favor tenants as landlords
experience increased competition. While tenant concessions have decreased,
municipal incentives are paving the way to attract tenants in the market. The
average quoted asking rate for the first quarter was $5.11 and $4.77 for
warehouse/distribution and manufacturing space, respectively. Expect rates to
climb slightly in the coming quarters, however: High amounts of planned
development remain available that should eventually counter the slight rental
growth.
s.f.
Vacancy down
San Antonio’s industrial vacancy rate ended the first quarter at 5.9 percent, down
120 basis points from 2015. With nearly 80.0 percent of year-to-date completions
leased on delivery, and 45.8 percent of under-construction facilities preleased,
overall net absorption continues to outpace completions. Significant activity is
occurring in the Northeast and Comal county submarkets with notable masterplanned industrial parks keeping pace with tenant demand. Much of the volume
in these planned speculative developments remains to break ground but shows
San Antonio is on pace to house much more inventory.
Completions
3,000,000
Net absorption
2,000,000
1,000,000
0
2010
2011
2012
2013
2014
2015
YTD
2016
Total vacancy
10.0%
8.0%
8.7%
6.0%
4.0%
2010
7.9%
2011
6.8%
6.0%
5.7%
2012
2013
2014
6.1%
5.9%
2015 YTD 2016
Notable leases
Deliveries and construction
Completions, year-to-date, totaled 502,000 square feet with four notable
deliveries, including Lookout Road (388,000 square feet, fully occupied), FedEx
Distribution facility (202,753 square feet, fully occupied), Building 1 of Alamo
Ridge Business Park (96,324 square feet, 38.0 percent occupied) and Enterprise
II (324,812 square feet, presently available). An additional 1.9 million square feet
is currently under way, with the largest projects being 1-35 Logistics Center
(397,600 square feet, presently available, set to deliver in the second quarter of
2017) and Rio Nogales Drive (557,000 square feet, build-to-suit).
502,000
YTD const. completions (s.f.)
79.4%
5.9%
Total vacancy
-120 bps
Tenant name
Deal type
Size (s.f.)
Confidential
New
196,800
Coastal Life Technologies
New
134,750
Confidential
New
85,800
Anemistat, Inc.
New
65,000
$5.01
+0.2%
1,955,454
45.8%
Total preleased
55
San Diego
New construction makes a dent in the vacancy rate
Vacancy backs off of record low to start the year
After reaching a record low by year-end 2015, direct vacancy (then 4.0 percent)
edged upward in the first quarter of 2016. Now at 4.4 percent, the direct vacancy
rate is still 150 basis points lower than the pre-recession low reached in 2006.
2001’s 5.3 percent vacancy rate was the lowest level recorded in San Diego until
2015. On the heels of six consecutive annual declines in the vacancy rate, San
Diego’s industrial market is not likely to reach the 100-plus basis point decrease
of the past four years in 2016.
Direct vacancy starts the year with an increase
Construction completions year-to-date surpass previous six years
In the first quarter of 2016, four industrial buildings, totaling 543,330 square feet,
completed construction. With asking rents and occupancy rates above their prerecession peak levels, developers have ramped up construction levels. The
largest building to deliver in the first-quarter was a 306,054-square-foot build-tosuit for FedEx. The other first-quarter deliveries were three speculative buildings,
totaling 237,276 square feet, at Ocean Ranch Corporate Center. All four
buildings are located in Oceanside.
Q1 surpassed annual construction totals of last five years
10.0%
5.0%
7.1%
5.9% 6.3%
9.7% 9.4% 9.1%
8.0% 7.4%
5.8%
4.0% 4.4%
0.0%
(s.f. in thousands)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
800
606
600
400
543
287
230
179
167
2010
2011
2012
2013
200
-
2009
366
2014
209
2015
After a six-year high in Q1, new supply in 2016 is far from done
The industrial buildings completed in the first quarter already pushed 2016’s total
past the previous six years, but that total may increase by 80.1 percent by yearend if slated delivery dates of the current under-construction pipeline stay on
schedule. The Ocean Ranch Corporate Center, which represented 43.7 percent
of the square feet delivered in the first quarter, was developed as a speculative
project. However, the project was leased by the time of delivery, with tenants
taking occupancy in the second quarter. The remaining pipeline for 2016 of
435,489 square feet under construction is 76.6 percent speculative development
and none of those projects have announced any preleasing activity to date. This
new supply will cause the market’s vacancy rate to increase if it comes online
without any tenants in place.
129,139
Vacant sublease (s.f.)
4.4%
Direct vacancy
$9.48
12.9%
YTD
2016
2016 industrial construction pipeline (s.f.)
543,330
435,489
Under construction
Completed
40,723
8.2%
Total availability
435,489
23.4%
Total preleased
56
San Francisco Mid-Peninsula
Prime market target for e-commerce “last mile”
No relief in sight for industrial supply crunch
The absence of industrial projects in the development pipeline for the MidPeninsula will exacerbate the current tight market conditions. Furthermore, a
significant amount of laboratory and office projects that target existing industrial
buildings for redevelopment add to the problem. In fact, more than 1.3 million
square feet of industrial space has been demolished since 2013 to make room
for new non-industrial projects; sky-high land costs make other assets with more
attractive returns more desirable. These conditions have inhibited the growth of
the area’s industrial inventory and make it very difficult for industrial tenants to
secure large blocks of space.
Strong demand for “last mile” distribution spaces
E-commerce, food processing and freight forwarding are the most prominent
types of industrial tenants in the Mid-Peninsula market. The desirable
demographic profile of the area and the close proximity to wealthy markets in
San Francisco and Silicon Valley make industrial buildings in this area highly
attractive. It is expected that demand for industrial space will grow stronger as ecommerce becomes more prominent. One way owners are anticipating this trend
is by renovating and repurposing their assets, creating highly efficient distribution
centers that cater to these types of tenants.
Acquisition activity shapes up to beat 2015
Last year acquisitions of industrial assets reached more than $450 million, a
historical high for the Mid-Peninsula. In the first quarter of 2016, transactions
totaled $116 million, suggesting another strong year. This recent trend of
acquisitions has spurred significant growth in valuations of industrial assets. For
instance, between 2013 and 2015 the average price per square foot increased by
66.7 percent. Fueling the stream of acquisitions are institutional investors
including Invesco, Sobrato and Prologis.
Total annual net absorption (s.f.)
1,000,000
500,000
0
-500,000
-1,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1'16
Total annual vacancy
10.0%
8.0%
6.0%
4.0%
2.0%
5.6%
4.0%
5.0%
6.6%
8.2% 8.7%
7.3%
3.0% 2.6% 2.8%
2.4%
0.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1'16
Declining industrial base
1,320,000 s.f.
Demolished industrial space in past three years
$1.00
300,452
$265.29
$454M
Avg. whse. asking rent (p.s.f., mo.)
Average sale price (p.s.f.)
Total amount of acquisitions in 2015
$1.70
242,784
35.6%
2,136,630
Avg. manuf. asking rent (p.s.f., mo.)
Space to be demolished (s.f.)
12-month p.s.f. change
Total space acquired (s.f.) in 2015
57
Seattle-Bellevue
Demand continues to outpace supply
Seattle continues to be one of the tightest markets in the United States
Total vacancy, by submarket cluster
Market fundamentals continue to strengthen in the Seattle-Bellevue market as
Seattle-Bellevue
3.7%
strong industrial tenant demand is contributing to low vacancy. Construction is
Northend
5.4%
under way on several major speculative projects, and millions of square feet are
Eastside
6.0%
in various phases of development; however, the demand for industrial space
Pierce County
4.8%
continues to outpace the increase in inventory. At just 3.7 percent, down 40 basis
Kent Valley
3.0%
points year-over-year, vacancy is historically low. The vacancy rate in the Seattle
Seattle
1.4%
cluster declined 20 basis points from 1.6 percent to an astounding 1.4 percent.
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0%
With Seattle being a very land-constrained market, vacancy is expected to remain
low throughout the year and leverage remains firmly in landlords’ favor.
Strong absorption trend continues in first quarter of 2016
After a strong finish to 2015, the Seattle-Bellevue market continues to experience
significant positive net absorption. More than 1.0 million square feet was
absorbed for the fourth consecutive quarter, as nearly 1.1 million square feet of
space was taken down. The highest net absorption was reported in the Pierce
County cluster at 495,118 square feet, followed by the Kent Valley cluster at
339,844 square feet. As a result of this rampant leasing activity and the lack of
available quality warehouse and distribution spaces, landlords have been
aggressively pushing rents. Strong rent growth should continue in the near future,
as the supply/demand imbalance remains in place.
Development activity increases to meet demand
As absorption remains strong and rental rates increase, developers are not
hesitating to break ground on new projects. Strong leasing and development
activity are most prominent in the Southend industrial market. Even with the influx
of new construction, increased demand has created a very space-constrained
market. Currently, 1.7 million square feet of speculative product is under
construction in the region. Strong preleasing in the form of 500,000 square feet
proves that tenants in the market are competing to secure the best available
spaces. Furthermore, the lack of developable land opportunities has pushed land
prices up to $10 to $15 per square foot in the Southend industrial market.
278,815,950
Total market size (s.f.)
3.7%
Total vacancy
10,468,254
1,805,789
Fourth consecutive quarter with over 1.0M s.f. net absorption
3,000,000
2,000,000
1,000,000
0
2012 2012 2013 2013 2014 2014 2015 2015 2016
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Development continues
1,805,789 s.f.
Currently under construction
6.0%
12,088,000
1,537,109
1,081,970
58
South Bay / Silicon Valley
Tight market conditions benefit peripheral markets
Developers increase bets on high-tech manufacturing assets
Tight market conditions make it difficult for tech manufacturers to stay close to
highly qualified Silicon Valley employees while curbing real estate costs.
Developers have identified this need and have begun bringing advanced
manufacturing assets to market on a speculative basis. This type of asset is
inherently riskier than other assets due to the high operating leverage they entail;
however, the South Bay industrial market has the right conditions where this bet
might work. The new technologies created in this region still lack a long history of
proven success and will take a time before the know-how can be carried over to
other markets.
Strong net absorption in line with previous quarters (s.f.)
Rapid space-use changes limits industrial large-block options
In the past four quarters, more than 1.3 million square feet of industrial space
has been transformed into other uses including residential, office and retail. The
rapid change in space use falls within a long-term trend in which the current
industrial inventory has been reduced by at least 10.5 percent since 2005. In
particular, developers have targeted the largest contiguous industrial spaces,
leaving behind mostly scattered small pockets of industrial product. In turn, this
has left a limited supply of large blocks of industrial space, which hinders the
possibility to scale up any sort of industrial use beyond “last mile” distribution
centers and experimental manufacturing.
Compressed vacancy rates pushing rents higher
$0.76
Avg. whse. asking rent (p.s.f., mo.)
$1.21
Avg. manuf. asking rent (p.s.f., mo.)
671,935
865,977
2,000,000
0
-2,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
15.0%
14.1%
12.9%
11.8% 12.0%
11.2%
10.0%
5.0%
9.9%
8.8%
7.9%
8.8%
5.8%
0.0%
4.7%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
2016
Limited availability of large blocks of space
10
# of blocks
First-quarter net absorption signals strong year ahead
With an increase of more than 670,000 square feet increase in occupancy this
quarter, the market has already reached 70.9 percent of total net absorption
recorded in 2015. As tech manufacturers and e-commerce companies start to
ramp up operations, demand for industrial space is likely to peak this year,
pushing rents higher and vacancy lower. Peripheral markets in the East Bay and
Central Valley are also likely to benefit from a spillover effect coming out of the
South Bay, supporting rent increases and new development.
4,000,000
5
4
Manufacturing
Warehouse/Distribution
8
4
0
1
1
50,000 - 100,000 s.f. 100,000 - 200,000 s.f.
1,880,000
109,028
Average active requirement (s.f.)
> 200,000 s.f.
1,743,511
61.3%
in Fremont and Newark
59
St. Louis
Construction cycle kicks into high gear
No near-term end in sight for tech growth in the market
Goods-producing employment across the region has been rising steadily for
several years. The sector posted annual employment gains in 50 of the last 51
months, the longest stretch since the mid-1990s. Increasing with warehouse
occupancy, growth in the transportation industry continues to outpace the
national average. While some operators such as Printpack, ConAgra and
American Railcar are in the process of shuttering local operations, several other
companies, including Diode Dynamics, Reckitt Benckiser and Weekends Only,
are expanding.
Goods-producing employment (in thousands of jobs)
Construction pipeline continues to build
Developer activity is expanding quickly across the market. A year ago only two
submarkets, North County and the Metro East, had buildings under construction.
That list now includes St. Louis City and St. Charles County. With a mix of buildto-suit and speculative activity, the market is expected to deliver almost 5.0
million square feet of product in 2016. At this time last year, St. Louis had 1.5
million square feet under construction; that number has more than doubled to 4.0
million square feet.
Projected construction deliveries in 2016 (s.f.)
390
365
340
2014
2015
2016
2,000,000
1,500,000
1,000,000
500,000
0
948,000
1,231,788
Q1 2016
Q2 2016
1,405,800
Q3 2016
1,252,780
Q4 2016
Renewals dominate first-quarter transactions
Leasing activity was dominated by renewals and extensions to start the year as
several tenants over 300,000 square feet chose to stay put. The largest lease
this quarter came as Reckitt Benckiser signed a 714,000-square-foot build-to-suit
at Premier 370 in St. Charles County. The new warehouse building is expected
to deliver at the end of 2016. Reckitt already has a manufacturing facility in St.
Charles County. Premier 370, being developed by Duke Realty, has been
dormant for several years. This will be one of several new buildings along the
370 corridor delivering in the next 12 months.
622,452
6.1%
Direct vacancy
730,347
Warehouse net absorption (s.f.)
2,028,338
Speculative construction (s.f.)
Leasing activity by type (leases over 30,000 s.f.)
Renewal/extension
25.5%
New/expansion
7.2%
67.3%
Build-to-suit
55.0% vs. 45.0%
4.2%
4,033,618
50.3%
Total preleased
60
Tampa Bay
Substantial construction in Polk County
Significant construction activity in three counties
There is currently 4.2 million square feet under construction, with the majority
taking place in the Polk County submarkets, specifically East Polk. The majority
of current construction activity is warehouse & distribution centers, driven in
large part by the growing importance of e-commerce nationally. From 2008 to
2015, only three buildings greater than 100,000 square feet delivered to Pinellas
County, which is due to numerous factors, including a lack of viable vacant plots.
FedEx recently broke ground on a 237,000-square-foot distribution center that is
expected to be delivered in early 2017, which will be the first warehouse larger
than 200,000 square feet delivered since before the recession.
Strong absorption continues in the first quarter
Total vacancy is currently at an eight-year low, and, combined with steadily
increasing rental rates, the overall market is set up for continued growth. Just
less than 2.9 million square feet was absorbed in 2015, and close to 950,000
square feet of product was delivered. The majority of the absorption during the
past quarter occurred in the East Side submarket, accounting for 98.0 percent
of all absorption. Over the past 12 months there was 2.5 million square feet of
absorption, with the East Side submarket accounting for 50.5 percent of
total activity.
Port expanding operations
In order to keep up with increasing cargo volumes, Port Tampa Bay is in the
process of installing two new cranes, which will augment the three existing
cranes currently in use. These will allow the Port to service ships with up to a
9,000-TEU capacity. In part of Port Tampa Bay’s aggressive expansion plan, a
110-acre land parcel was recently purchased, with the land intended for cargo
storage and other purposes. The Port generates almost 100,000 jobs and
provides $8.0 billion in economic impact annually. Under the current leadership
the Port is set up to continue to be a key economic driver moving forward.
194,003,518
6.9%
Total vacancy
606,125
11.2%
Total availability
Construction, by county (s.f.)
3,665,120
4,000,000
3,000,000
2,000,000
1,000,000
0
Polk
248,500
236,976
Hillsborough
Pinellas
Absorption past 12 months, by submarket (s.f.)
1,500,000
Net absorption
1,000,000
500,000
0
Port continues to grow
36,000,000
Tons of cargo handled annually
Source: JLL Research, Port Tampa Bay
$4.73
5.1%
4,150,596
283,023
61
Washington, DC
Washington, DC posts healthy quarterly absorption
Northern Virginia vacancy pushes lower
In addition to nearly 500,000 square feet of space delivering preleased, Northern
Virginia’s overall vacancy rate fell 20 basis points in the first quarter of 2016.
Supply surrounding the greater Northern Virginia market continues to lag behind
the consistent demand of its modern user base. Slowed leasing velocity, due in
large part to restricted supply, has limited tenant options that continually come
from a service-oriented user base looking to be in close proximity to the third
largest MSA. Since the area has limited Class A availability across most
submarkets, and an overall vacancy rate of 7.6 percent, market dynamics will
remain in favor of the landlord heading into the second quarter.
Northern Virginia W&D vacancy, by submarket
Healthy absorption drives vacancy downward in suburban Maryland
The vast majority of suburban Maryland’s growth during the quarter has been
focused in Frederick County and Prince George’s County. The majority of these
lease transactions continue to be driven by tenants upgrading from functionally
challenged buildings to newer construction at higher rates. Notable leases
include Washington Cash and Carry taking down 136,860 square feet at 6300
Sheriff Road and Chesapeake Math and IT Academy leasing 108,378 square
feet at 9822 Fallard Court. Despite heathy absorption and low vacancy, it is likely
that rental rates will level out in the second quarter as newly constructed Class A
product remains vacant, forcing landlords to become competitive with rates.
Suburban Maryland W&D vacancy, by submarket
Construction likely to slow in suburban Maryland
Developers continue to push forward with speculative construction in response to
Prince George’s County’s historically low vacancy rates and promising tenant
pipeline. Suburban Maryland currently has nearly 1.2 million square feet of space
under construction, 48.2 percent of which is preleased. Nearly half of the
preleased space is from build-to-suits for Thompson Windows and the United
States Holocaust Museum. While tenant growth remained healthy in the first
quarter, new market entrants were limited and will likely cause speculative
construction to slow in Prince George’s County, as there is currently over 1.1
million square feet of Class A vacancy.
Suburban Maryland available blocks of space
90,635,952
W&D total inventory (s.f.)
7.7%
W&D overall vacancy
494,129
W&D YTD net absorption (s.f.)
11.0%
W&D overall availability
Herndon/Reston
Prince William West
Greater Fairfax
Dulles North
Prince William East
Alexandria/Arlington
Dulles South
Southeast Fairfax
1.7%
3.1%
4.5%
6.0%
6.1%
8.5%
9.4%
13.5%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
Lanham
College Park
Bowie
Frederick County
Montgomery County
Central PG
Northern PG
Southern PG
0.0%
0.6%
0.0%
2.0%
4.7%
4.0%
6.0%
6.0%
7.7%
8.5%
9.5%
10.6%
8.0%
10.0% 12.0%
# of blocks
40
Existing
Under construction
4
20
27
3
14
1
0
50,000 - 99,999 s.f. 100,000 - 249,999 s.f.
$8.07
W&D average asking rent (p.s.f.)
4.1%
Quarterly asking rent growth
> 250,000
1,547,618
38.9%
Total preleased
62
Based on net
absorption’s quarterly
average in recent years –
and still healthy U.S.
consumer demand –
absorption will almost
certainly outpace new
supply again this year.
63
For more information, please contact:
Craig S. Meyer, SIOR
President Americas
Industrial Brokerage
+1 424 294 3460
[email protected]
License #: 00586344
Aaron Ahlburn
Senior Vice President
Director of Research
Industrial & Logistics
+1 424 294 3437
[email protected]
Dain Fedora
Research Manager
Americas Industrial
+1 424 294 3444
[email protected]
Mehtab Randhawa
Research Manager
Americas Industrial
+1 919 424 8459
[email protected]
Benjamin Breslau
Managing Director
Americas Research
+1 617 531 4233
[email protected]
About JLL
JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased
value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0
billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its
clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square
meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment
Management, has $58.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle
Incorporated. For further information, visit www.jll.com.
About JLL Research
JLL’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial real
estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 400 global research professionals track and analyze economic
and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise,
fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful
strategies and optimal real estate decisions.
This publication is the sole property of Jones Lang LaSalle IP, Inc. and must not be copied, reproduced or transmitted in any form or by any means,
either in whole or in part, without prior written consent of Jones Lang LaSalle IP, Inc.
COPYRIGHT © JONES LANG LASALLE IP, INC. 2016

United States Industrial Outlook

Transcription

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