According to Cushman & Wakefield's mid-year 2011 statistics for the U.S. industrial market, the overall vacancy rate has declined to a two-year low.
The overall average vacancy rate declined to 9.7 percent at midyear 2011, down from10.6 percent at this time last year, and its lowest level since the first quarter of 2009. With a 0.5 percentage point decrease from 10.2 percent at the end of the first quarter, it was the biggest quarterly decline in the U.S. industrial vacancy rate since the first quarter of 1997, when the vacancy rate dropped 0.6 percentage points to 7.8 percent. The U.S. markets with the highest quarter-over-quarter declines included the San Francisco Peninsula(declined from 8.5 percent to 7.1 percent), Boston (declined from 19.6 percent to 18.7 percent), Northern New Jersey (declined from 10.0 percent to 9.2 percent) and Silicon Valley, Calif. (declined from 12.7 percent to 11.9 percent).
Increases in leasing activity contributed to the decline in vacancy. Year-to-date leasing activity for U.S. industrial markets totaled 144.8 million square feet at midyear 2011, a 14 percent increase from the 126.6 million square feet leased in the first half of 2010. While 17 of the 33 markets tracked by Cushman & Wakefield have had increases in leasing activity year-over-year, markets with the largest increases included Inland Empire, Calif. (up 4.5million square feet), Dallas/Fort Worth (up 3.5 million square feet), Central New Jersey (up 3.0 million square feet), Silicon Valley, Calif. (up 2.2 million square feet) and Chicago (up 1.4 million square feet).
"While things have been looking up for the U.S. industrial market over the past several quarters, it is now clear that our recovery is picking up momentum," said Jim Dieter, executive vice president and head of U.S. Industrial Brokerage. "Though there are some new projects that have been delivered, the majority has been on a build-to-suit basis, and strong leasing activity has demonstrated that the demand is there."
Year-to-date,8.9 million square feet of new industrial space was added to the market, up slightly from the 8.2 million square feet added in the first half of2010. However, compared to 2010 when 30.1 percent (or 2.5 million square feet) of that space was built on spec, only 11.2 percent (or 1.1 million square feet) of the new space added in 2011 has been speculative. Approximately15.8 million square feet is currently under construction, with 13.4 million square feet expected to be completed in the second half of this year. Markets with the most new industrial space added year-to-date included Dallas/Fort Worth (1.6 million square feet), Chicago (1.4 million square feet),Atlanta (1.1 million square feet) and Houston (845,836 square feet).
For the third consecutive quarter, overall absorption was positive, totaling positive 38.1 million square feet year-to-date, up from the negative 12.9million square feet in absorption recorded at this time last year. In the second quarter of 2011 alone, 30.3 million square feet of industrial space was absorbed.