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In its 2010 Q-1 Industrial report, Grubb & Ellis Co. finds that vacancy, absorption and rental rates continue to give ground nationwide.

Bob Bach, senior vice president, chief economists stated in a release that the pace of deterioration is easing, but perhaps not quickly enough for many industrial property owners.

“The drivers of demand for industrial space have been improving for several months including the ISM manufacturing index, freight shipments, imports and exports, inventory restocking and retail sales,” said Bach. “But the economic decline was so precipitous when the financial markets hit the wall in late 2008 that it will take awhile for many of these indicators to make up the lost ground.”

The report also finds that developers delivered a total of 4.3 million square feet in the first quarter, the lowest output in a decade.

“Industrial product has a shorter construction timeline than office, retail or apartment product, meaning that the industrial market will hit bottom first,” said Bach. “Expect that to happen by the end of this year followed by a measured recovery beginning in 2011.”

Key figures reported by Grubb & Ellis

• Vacancy increased for a 10^th consecutive quarter to 10.9 percent while the rate of increase continued to decline. Over the past five quarters, vacancy has increased sequentially by 70, 60, 30, 30 and 20 basis points.
• Net absorption was mired in the red for a sixth consecutive quarter, totaling minus 12.4 million square feet. It was the shallowest loss of occupancy since the fourth quarter of 2008. By comparison, net absorption for all of 2009 was minus 140 million square feet.
• Developers delivered 4.3 million square feet of new product in the first quarter, the lowest rate in at least the past decade. Only 13.1 million square feet of space remained in the construction pipeline or just 0.1 percent of the existing inventory, the lowest percentage since Grubb & Ellis began tracking the national industrial market in 1986.
• The average asking rental rate for all types of industrial space offered on the market at the end of the first quarter was $5.16 per square foot per year triple net, a decline of 0.8 percent from the fourth quarter and 6.7 percent from the year-ago quarter. Rates for available space ended the quarter at $5.09 for general industrial (primarily manufacturing), $4.18 for warehouse-distribution and $9.16 for R&D-flex. Over the past four quarters, the average rates slipped by 5.3 percent for general industrial, 6.8 percent for warehouse-distribution and 9.0 percent for R&D-flex.

Tags | Grubb & Ellis, industrial, Report

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