U.S. industrial market ending year on a positive note

Supply chain efficiencies remain a primary focus for industrial space users nationwide heading into the final weeks of 2010, said a leading industrial brokerage firm.

According to Jim Dieter, executive vice president, industrial brokerage, U.S. Cushman & Wakefield, the tenant movement centered on efficiencies is breeding cautious optimism.

“And as movement begins to pick up among tenants, especially in the country’s major intermodal markets, we will end the year optimistic regarding fourth-quarter performance and a positive outlook heading into 2011,” he said.

Dieter said that vacancy rates appear to have stabilized, and he does not see anything on the horizon that will alter this welcome news. The overall vacancy rate for the U.S. industrial market remained at 10.6 percent at the end of the third quarter of 2010, unchanged from midyear, after peaking at 10.8 percent at the end of the first quarter.

Indeed, half of the 34 industrial markets Cushman & Wakefield tracks registered a quarter-over-quarter decrease in vacancy rates. Among them, Boston saw a 1.4 percentage point decrease, to 18.8 percent; Portland, Ore., recorded a 1.3 percentage point decrease, to 7.3 percent; and Contra Costa, Calif., had a 0.7 percentage point decrease, to 14.0 percent.

Leasing totals reached 189.8 million square feet through the first nine months of 2010, an 11.9 percent increase from the 169.5 million square feet leased during the same period in 2009. Twenty U.S. industrial markets charted a year-over-year leasing increase.

“Much of this activity revolves around companies’ drive toward increased supply chain efficiencies,” said Dieter.

In one notable trend, the brokerage is seeing a shift toward companies taking more, but smaller, distribution buildings closer to their consumer bases. This is especially prevalent among big-box retail.

“We also are seeing more companies being drawn to major intermodal markets. These multi-faceted transportation hubs can be a key part of improving logistics because they enable tenants to use multiple means – rail, truck, air and water – to move goods,” said Dieter.

As such, first-tier intermodal markets like Chicago, Memphis, Dallas and Harrisburg, Pa.; and even second-tier markets like Kansas City, Mo., likely will see healthy growth in 2011 and beyond, Dieter added.

“Rail hubs will remain integral to the industrial sector as well, providing one of the most consistent and reliable transportation modes in the face of unpredictable fuel and freight pricing, and ever-increasing road congestion,” he said.

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