Warehouse Demand Nationally and in Austin
With demand expected to outpace supply through 2014 and rents finally beginning to rise again, as warehouse buyers and investors are increasingly interested in placing capital in the U.S warehouse sector.
Why? Multifamily is getting pricey due to the strong demand, office cap rates are lower than warehouse space cap rates which of course become more attractive.
There had been 35 million square feet of positive absorption within largest metros across the country,75% of those markets are showing growth demand.
With very little new space being delivered, demand is translating into quick occupancy gains and a deepening, widening recovery. Average asking rents are moving off their lows. The industrial vacancy was 8.6% in the 210 largest U.S. markets, down 21 basis points from the fourth quarter and in the Austin area the warehouse vacancy rates are below 17% heading into May 2013.
Markets with the strongest occupancy growth in the quarter were Phoenix, Edison, NJ, and Detroit. Lack of supply pushed rents up in Portland, OR, Indianapolis and the East San Francisco Bay Area. The few markets that saw more vacancies were Lehigh Valley, PA; Indianapolis and the Inland Empire.
Depending on the market and sub market dictates how the numbers go . Overall,, the numbers show that the percentage of U.S. sub markets with rent and occupancy growth is a sign that there is some type of recover in the works currently.
Prospects Bright for Warehouse Space
Employment picture has improved for industrial properties
With manufacturing continuing to grow and job growth in transportation and utilities outpacing all service-related sectors. Seaport warehouse properties are down currently due to exporting requirements to nations like China have dropped.
Housing in the USA has helped booster the recovery within the warehouse property sector.
Surprising Strength in Mid-Size Box Demand
Warehouse space of at least 100,000 square that has been built since 1990 have never posted a quarter of negative absorption, and their total occupied space is more than 200 million square feet above previous recession levels. Higher warehouse property occupancy happens most often where there are not alot of new builds coming to the specific market.
The national distribution markets are where developers are the most active currently, there is good leasing activity and stronger liquidity from potential tenants.
In the national distribution segment for warehouse properties there is a higher demand typically , investors can hedge this by investing in other markets that are not national distribution areas .
High Supply for warehouse space in Arizona
According to an Arizona based commercial real estate broker:
“Demand should remain strong in Phoenix for large distribution, but many are worried about planned construction activity in that segment,” Demeter said.
Existing warehouse space in Atlanta filling up
“Judith Bennett, senior vice president of the national self-storage group for Atlanta-based Bull Realty, Inc., sees increasing occupancy for existing industrial inventory and heightened activity from both tenants and owners due to rising business and port activity”
Warehouse Demand Austin area
Within the Austin area there is still alot of demand for warehouse space that ranges from 2,500 SF to 5,000 SF, there are alot of businesses migrating to the Austin area with 1000 people moving into the area per week according to a residential Realtor. One of the most important points for tenants seeking a lower square footage warehouse property is that a term less than 3 years will get very little leverage with a landlord in a market where vacancies are in the teens.