U.S. Industrial Q1 2020 Review Amanda Ortiz, National Director, Industrial Research | USA

U.S. Industrial Q1 2020 Review Amanda Ortiz, National Director, Industrial Research | USA

By Ward Richmond

U.S. Industrial Demand Doubled Year-Over-Year

Despite the emergence of COVID-19, the industrial sector remained active.

• First quarterdemandwasstrong and totaled63.5 million square feet of positive absorption, nearly double the 32.6 million square feet recorded this time last year.
• Overall vacancy rate was stable at 5.2%, up from 5.0% Q1 2019, and 5.1% Q4 2019. Vacant spec development that delivered during the quarter caused the slight uptick in vacancy. More than 329 million square feet remain under construction.
• Direct askingrents rose 1.5% over last quarter and measuredat $6.18/sf for W/D space, an all-time high.
• The Inland Empire claimed the top spot for absorption, Houston came out on top for new supply, and Dallas-Fort Worthremained#1forprojects under construction.

U.S. Industrial Overall Vacancy Rate Breakdown Q1 2020

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U.S. Top 10 Rankings Q1 2020

3PLs Remain Top Bulk Occupier of Industrial Space

• Bulk occupier activity (transactions greater than 100,000 squarefeet) totaled 137.5 MSF during Q1 2020, 10.6% lower than this time last year with 153.8 MSF occupied.
• During Q1 2020, 527 industrial (warehouse, manufacturing, flex) new leases, renewals, and user sales were transacted with an average transaction size of 261,000 square feet.
• Third-party logistics and packaging companies (3PLs) remained the top occupier of bulk industrial space, although market share for the industry decreased to 24.7%,down from 27.5% of all bulk space transacted one year ago, and 25.1% last quarter.
• Amazon topped the list of bulk occupiers in the U.S., filling 6.0 MSF in the first quarter. Home Depot and Lowe’s both made the top 10 list, as an increase in home improvement projects during the pandemic could signify further growth in the coming quarters.

Top 10 New Occupiers of Space in the U.S. Q1 2020

Overall Net Absorption Remains Positive

Asking Rents Continue to Climb

New Supply Remains High as Projects Continue

U.S. Industrial Sector: Average Pricing 2001 –YTD 2020

U.S. Industrial Sector: Average Pricing 2001 –YTD 2020

U.S. Industrial Sector: Cap Rates Inch Higher

What’s Next?

• E-commerce will continue to transform industrial space.
• Industrial activity will be bifurcated by size.
• Headwinds
  – COVID-19
  – Weakening Global Economy
  – Disruptions to Global Trade.
• New trends
  – Increased use of automation
  – Rise of safety stock
  – Onshoring/nearshoring/reshoring of production capacity
  – Operations adjustments due to COVID-19.

MEET THE TEAM MEMBERS

Ward Richmond has over twelve years of experience specializing in industrial real estate, and has negotiated over 500 transactions while working in over 100 cities across the USA, Canada, and Mexico. Several publications have featured Ward for his expertise in this field including the Wall Street Journal, Dallas Morning News, and Dallas Business Journal. He also serves on Colliers International Industrial Advisory Board, and is a member of the Logistics & Transportation Solutions Group.

WARD RICHMOND, SIOR

Executive Vice President

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Senior Associate

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Senior Associate

KRISTINA RODRIGUEZ

Client Services Specialist

James Ewing

Associate

ON THE ROAD AGAIN

Oct 14-15, 2020: Colliers International Conference, Nashville, TN

The Gladiator Group is supported by Colliers International Research Team

CONTACT WARD RICHMOND AT:

Office 214.217.1201
Mobile 214.336.5757
Email [email protected]

ABOUT THE AUTHOR

Ward Richmond

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