Corporate spending, manufacturing gains to bolster industrial sector
July 06, 2010 | Mark Thomton | Print Article | Email this Article
While industrial vacancies will remain elevated through year-end 2010, the economic recovery will stabilize property performance and set the stage for modest improvement next year, according to a new report issued by Marcus & Millichap Real Estate Investment Services.
“Future economic expansion will be driven by personal and corporate spending, which were the primary drivers of GDP growth during the first quarter of 2010,” says Alan Pontius, managing director of the firm’s National Office and Industrial Properties Group. “As private consumption resumes, business will be encouraged to replenish depleted inventories in anticipation of further increases in demand, albeit at a slow pace.
“Manufacturing continues to post gains, which will also bolster a 2011 recovery in the industrial property sector,” explains Pontius. The manufacturing sector grew for the 10th consecutive month during May, driven by continued strength in new orders and production.
According to the Special Industrial Research Report, employment growth will be a crucial component in buoying consumer sentiment and supporting spending, and while recent payroll additions have exceeded expectations, it will take years for the economy to recover the 8.4 million jobs lost during the recession.
Recent positive economic developments have yet to translate into heightened tenant demand for industrial space, as many tenants have more space than they need. Widespread improvement in the industrial market will likely not occur until 2011 and 2012, when more robust economic and employment growth will take hold.
The report contains the National Industrial Index (NII), which ranks 27 of the nation’s industrial markets based on a various factors, including projected employment changes, construction, net absorption, revenue change and vacancy. Houston, Los Angeles and Denver are the top three markets, while Tampa, Atlanta and Detroit rounded out the bottom of the list.
Tags | industrial, Marcus & Millichap
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