The so-called availability rate for U.S. industrial real estate came in flat during the first quarter as warehouse and distribution center demand matched the delivery of newly built supply, a report from real estate services firm CBRE Group Inc. (NASDAQ: CBRE) said Thursday.
The availability rate, defined as the sum of vacant space and space that's currently occupied but is being marketed for use by new tenants, dipped by less than half a basis point, according to CBRE data. Net absorption, the difference between the square footage physically occupied during a specific period and the space vacated in that same time frame, reached 32 million square feet in the quarter. That matched construction completions of 33 million square feet, CBRE said. The survey canvassed activity in 55 U.S. markets.
The result, said CBRE, is a balanced market, a phenomenon not seen for several years as industrial demand has far outpaced available space due to the surge in demand for distribution center space to support e-commerce fulfillment and delivery.
Industrial property experts expected a flat performance during the quarter as overall demand cooled while supply caught up. Businesses were cautious heading into 2019 due to concerns over U.S.-China trade issues, slowing global economies, uncertainties over Britain's possible exit from the European Union, and weak fourth quarter stock markets across the globe.
The relatively modest dip in availability still marks the 35th consecutive quarter of declines, the longest stretch of falling availability rates since CBRE since started tracking the data in 1988. Availability of U.S. industrial real estate registered 7 percent in the first quarter, its lowest level since 2000, CBRE said. The industrial property sector is entering the ninth year of an unprecedented bull market, though 2019 is likely to see the industry take its foot off the gas pedal somewhat.
"Net absorption should pick up through the rest of this year in step with the [U.S.] economy," Richard Barkham, CBRE's global chief economist, said in a statement. The industrial and logistics real estate sector should continue to benefit from potent demand for e-commerce fulfillment and healthy levels of consumer spending, Barkham said. For now, the market is in a "nicely balanced" state, he added.
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