2A — May 13 - 26, 2016 — M id A tlantic
Real Estate Journal
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MAREJ A dvertising D irectory ALPS Technology.............................................................. 23D AMBOY Bank..................................................................... 9D American Architectural Window & Door........................ 10D Apex Realty Advisory....................................................... 17A ARD Appraisal Co.............................................................. 5D ARROW Steel. .................................................................. 22D Assured Environments................................................. 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IC-B CIRC.................................................................................. 18A Columbia Bank...............................................................BC-D Concannon Miller............................................................. 11C Cooper-Horowitz, Inc.......................................................... 9A Cost Segregation Services Inc............................................ 6A CREW Lehigh Valley. ................................................. 10-11C CREW NJ.......................................................................... 16B Crystal Window & Door Systems...................................... 6D Cushman & Wakefield................................................... BC-B Deerwood Real Estate Capital........................................... 7A designpoint........................................................................ 11C DSM Commercial - Sussex County Office....................... 12A DSM Commercial. ............................................................ 17A E.B. Cohen.......................................................................... 4D Earth Engineering.............................................................. 2C Ehrlich, Petriello, Gudin & Plaza.................................... 21D Elliott-Lewis. ...................................................................... 8D Environmental Systems................................................... 21A Evolution Energy Partners................................................ 7C Fowler Companies............................................................ 21A Gebroe-Hammer Associates.......................................4B, 11D GriffinAlexander, PC.......................................................... 3D Harvey, Hanna................................................................. 19A Heller Industrial Parks.................................................... 10B HFF................................................................................... 17D Hillcrest Paving & Excavating........................................ 21A Hinerfeld.....................................................................21A, 1C Integrated Business Systems. ......................................... 14D Investors Real Estate Agency.......................................... 21A Jackson Cross Partners.................................................... 12A Jewel Electric Supply Co.................................................. 16D Kaplin Stewart. .................................................................. 3A Landmark Commercial...................................................... 2C LEW Corp.. ......................................................................... 2D Llenrock........................................................................... IC-C M & T Realty Capital Corp.............................................. 10A M. Miller & Son.................................................................. 7D Mainardi Management..................................................... 21A Marcus & Millichap............................................................ 3A Markward Group................................................................ 4C Massaro Properties............................................................. 6C Mericle Commercial Real Estate Services.................... BC-C Meridian Capital Group................................................... 17B Moonstone Environmental............................................... 11C NAI DiLeo-Bram & Co....................................................... 7B NAI Emory Hill. ............................................................... 16A NAI Mertz........................................................................... 3C NAI Summit...................................................................... 21A Onorati Construction. ...................................................... 13D Penn’s northeast................................................................. 5C PennCap Properties. ........................................................ 21A Poskanzer Skott Architects.............................................. 13B PREC................................................................................... 9C Prism................................................................................. 14B Provident Bank............................................................... BC-A Real Property Capital......................................................... 4A Red Marketing Communications....................................... 2B Redwood Realty Advisors................................................... 3B Regal Bank........................................................................ 12D RT Environmental Services............................................... 2B Specialty Building Systems............................................ IC-D SUBWAY Development.................................................... 21A The Berger Organization................................................... 1B The Kislak Co...............................................................6B, 1D ULI Philadelphia................................................................ 8C Warner Real Estate & Auction........................................ 12B WCRE.................................................................................. 4B Withum............................................................................. 15D
Mid Atlantic R eal E state J ournal Publisher ............................................................................ Linda Christman Publisher ............................................................................... Joe Christman Associate Publisher ................................................................ Steve Kelley Associate Publisher .............................................................Alissa Aronson Associate Publisher ..........................................................Barbara Holyoke Associate Publisher ..............................................................Eric Ballenger Senior Editor/Graphic Artist .................................................Karen Vachon Production Assistant/Graphic Artist ...........................................Julie King Office Manager .................................................................... Joanne Gavaza Mid Atlantic R eal E state J ournal — Published Semi-Monthly Periodicals postage paid at Rockland, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal, 312 Market St. Rockland, MA 02370 USPS #22-358 | Vol. 28 Issue 9 Subscription rates: $99 - one year, $148 - two years, $4 - single copy REPORT AN ERROR IMMEDIATELY MARE Journal will not be responsible for more than one incorrect insertion Toll-Free: (800) 584-1062 | MA: (781) 871-5298 | Fax: (781) 871-5299 www.marejournal.com The views expressed by contributing columnists are not necessarily representative of the Mid Atlantic Real Estate Journal
Mid Atlantic Real Estate Journal
Industrial vacancy approaches historic low after year-over- year absorption gains Kevin Thorpe N John Morris EW YORK, NY — U.S. industrial mar- kets absorbed 57.8 million s/f (msf) of space in the first quarter of 2016, up 9.3% from the first quarter a year ago, according to Cush- man & Wakefield ’s first quarter industrial report. This marked 24 consecutive quarters of positive net oc- cupancy gains for the sector, placing the current expansion among the longest on record. It is also among the strongest. The U.S. industrial market shed over 182 msf of occu- pancy during the economic downturn, but it has ab- sorbed more than 990 msf in the expansion. The national industrial vacancy rate con- tinued to decline in the first quarter, falling by 20 basis points (bps) from the prior quarter and 70 bps from the prior year to 6.1%. Industrial vacancy is currently tracking at the lowest level of the past 30 years and is now a full 240 bps below the 10-year histori- cal average. Kevin Thorpe , Cushman & Wakefield’s chief econo- mist, says the outlook for the industrial sector remains promising, and he expects 2016 to be another year of strong growth. “Going forward, the demand drivers for industrial remain firmly intact,” Thorpe said. “Much of what drives demand for industrial space links to the U.S. consumer, and by most measures, the consumer is feeling confident and spend- ing. With the U.S. economy now showing signs of shaking off the first quarter blues and with the U.S. consumer on solid footing, the outlook for industrial demand remains robust. Our forecast calls for 2016 to be another year where net absorption surpasses the 200 msf mark, and consider- ing all that transpired in the first quarter, we are well on our way.” U.S. industrial rents in- creased 3.8% in the first quar- ter compared to a year-ago. Industrial rents increased in 68 of 79 markets tracked by Cushman & Wakefield from the first quarter of 2015 to the first quarter of 2016, with
speculative projects under construction totaled 109.9
over one-fifth of the country now reporting double-digit
“With the U.S. economy now showing signs of shaking off the first quarter blues and with the U.S. consumer on solid footing, the outlook for industrial demand remains robust. Our forecast calls for 2016 to be another year where net absorption surpasses the 200 msf mark” ~ Kevin Thorpe
msf, comprising 62.5% of the total 175.8 msf currently un- der construction. “Construction is certainly ramping up, but it remains well below what we observed at the peak of the last cycle,” said Jason Tolliver, Cushman &Wakefield Head of Industri- al Research, Americas. “Dur- ing the period of 2004-2009, we saw the delivery of over 776 msf of product. Compare that to this expansion, where from 2010-2016 we’ve wit- nessed 566 msf of deliveries and historic absorption, and it shows that nationally we aren’t overbuilding yet. We believe leasing activity should keep pace with new construc- tion in the majority of markets over the course of 2016.” In the first quarter of 2016, the top 10 strongest markets in terms of demand for in- dustrial space were Dallas/ Ft. Worth, with 6.8 msf of ab- sorption; Central New Jersey, with 5.1 msf; Chicago, with 3.9 msf; the Inland Empire, with 3.7 msf; Atlanta, with 3.3 msf; Detroit, with 2.8 msf; the Pennsylvania I-81/I-78 Distribution Corridor, with 2.7 msf; Philadelphia, with 1.5 msf; Greater Los Angeles, with 1.4 msf; and Phoenix, with 1.4 msf. Among the tightest mar- kets in terms of overall va- cancy included Denver and Greater Los Angeles, at 2.2%; Orange County, at 2.8%; San Jose, at 3.0%; East Bay, at 3.2%; Cincinnati, at 4.2%; Milwaukee and Portland, at 4.8%; Miami, at 4.9%; and Detroit, at 5.0%. n
gains. In many markets, industrial rents are now ei- ther at their historic high or quickly approaching it, and on a national level we are witnessing rental rate ap- preciation for every industrial product type. John Morris , executive managing director of logis- tics & industrial services for the Americas, also expects continued growth for the in- dustrial sector and notes that shopping-fulfillment-channel migration to e-commerce is giving rise to a net new user, supporting industrial funda- mentals. “Logistics is becoming a competitive service business focused as much on shipping direct to customers’ homes as shipping to brick-and- mortar stores,” said Morris. “Increasingly, businesses are doing their own e-commerce, and basic branded compa- nies are trying to guide their businesses more online. The transformation that branded companies are undergoing themselves – developing a direct relationship with con- sumers – is expected to lead to significant requirements for new industrial space across the country.” On the development front, 51.7 msf of industrial prod- uct was delivered in the first quarter with the majority of deliveries coming online in major industrial markets and primary inland distribution hubs. Developers continued to break ground on more speculative projects in many markets. In the first quarter,
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