NAIOP Study Shows Demand for Industrial Space Not Slowing Down

A report released today by the NAIOP Research Foundation says that net demand for industrial space could reach 242 million square feet in 2015, thanks to the U.S. economy’s accelerated growth through the end of 2014 and its robust indications of strength for 2015.

Report Highlights Include:

    2015 quarterly net absorption will average 60.5 million square feet.2014 industrial net absorption reached a near-record 224 million square feet – an 8 percent increase over 2014.Asking rental rates steadily elevated in each quarter of 2014.

The report says that the consumer segment of the economy is looking healthier than it has since 2007, before the Great Recession. Retail spending has set new record highs almost every month, unemployment has hovered around the near full employment level of 5.6 percent as of December 2014, and there even appear to have been some gains in real wages in industries such as leisure and hospitality and information. Further, the recent decline in oil and gasoline prices offers a great form of stimulus to many lower- and middle-income families that will no doubt translate into increased consumer productivity.

“We expect the first half of 2015 to be slightly more robust than the second half, as pent up demand is satisfied and the economy starts to temper. This trend should likely persist throughout 2016, when our absorption forecast moderates to a net gain of 206 million square feet,” said Dr. Joshua Harris, University of Central Florida and a NAIOP Distinguished Fellow and study co-author, along with Dr. Hany Guirguis, Manhattan College.

“A great deal of the demand for industrial space to come from firms that produce and distribute consumer goods, and that’s why commercial real estate is seeing such a boom in e-commerce fulfillment and distribution facilities,” said Thomas Bisacquino, NAIOP president and CEO. “Another leading sector is automotive, which has grown considerably [auto sales are up 6.03 percent in 2014] and is strongly recovering from the recession.”

Guirguis and Harris note one gloomy sector of industrial demand will likely be oil and gas producers and their servicers, contractors and suppliers. The fall of oil prices to below $50 per barrel is assuredly going to translate into reduced oil exploration activities in the U.S. and elsewhere as supply outshoots demand. On net, the authors believe losses in space due to energy price weaknesses will be more than made up by gains in consumer-serving industry demand, but regional differences are nonetheless likely to occur.

Download the full report

Source: NAIOP

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