CBRE research shows mild decline in Q1 industrial and logistics real estate availability

Research recently released by industrial real estate firm CBRE showed that the first quarter availability rate for United States industrial real estate, for the first quarter of 2019, was essentially flat, falling by less than half of a basis point to 7.0%, while demand for warehouses was largely in line with the delivery of newly constructed supply.

CBRE said that this bring the stretch of consecutive quarters of declining availability to 35, which, it noted, represents its longest period of declining availability going back to when it first started tracking this data in 1998.

And over the last year CBRE said that the availability rate is down 30 basis points. What's more, based on its preliminary data, CBRE said first quarter that aggregate net absorption across 55 U.S.-based markets was the equivalent of 32 million square-feet, which was in line with matching construction completions of around 33 million square-feet. CBRE said that both first quarter aggregate net absorption and construction completions were “surprising to the downside,” as, on a historical basis, completions have tended to be weaker in the first quarter and then bouncing back over the course of the year.

CBRE defines availability as the sum of vacant space plus space that is currently occupied but otherwise being marketed for use by new tenants. In the first quarter, CBRE found 30 of the markets registering declines in industrial availability from the previous quarter, 26 reporting increases and eight remaining unchanged.

“Net absorption should pick up through the rest of this year in step with the economy,” said Richard Barkham, CBRE Global Chief Economist, in a statement. “We expected a tepid start to the year, due in part to a weaker global economy and stock market turbulence at the end of last year. But the overall picture is a nicely balanced industrial sector, with demand and supply broadly in line.”

Barkham told LM that both demand and supply eased slightly in the first quarter, but they ended up in line with each other, which was the reason for no change in availability.

And he added that with the first quarter availability rate at 7% at the end of 2018 and remained the same at the end of the first quarter. At the start of 2018 the Availability Rate was 7.45% and the average for the year was 7.15%.

And he also said that the industrial and logistics real estate sector is still seeing the benefits from the ongoing structural shift to e-commerce and healthy consumer spending levels.

“GDP growth, particularly consumers spending….is expected to remain strong,” he explained. “Also the longer term growth in e-commerce, too, with e-commerce growing at about 12 to 15% per annum.”

On the demand side, he cited drivers, including: sustained growth in the U.S. economy, global trade, growth in goods imports from overseas, growth of e-commerce. And on the supply side, he pointed to a relatively well disciplined level of completions, partly due to difficulty in finding sites for new development.

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