Colliers International Group Inc. (Nasdaq:CIGI) (TSX:CIG) has released its 2015 Q1 North America Industrial Highlights Report, which points toward continued robust activity for the remainder of 2015. The North American industrial real estate market is particularly supported by strong economic and market fundamentals, including continued GDP and job growth, rising consumer optimism, an evolving e-commerce landscape and the growing demand from retailers for modern distribution centers.
"The results of our North American Q1 survey were decidedly optimistic, particularly in U.S., with those surveyed anticipating ongoing growth," said Dwight Hotchkiss, National Director, Industrial | USA. "Most notably, more than three times as many markets reported that they expect tenants to expand in the upcoming quarter. Additionally, the majority of U.S. respondents forecast declining vacancy rates and rent increases."
Key takeaways from this report include:
- The North American industrial vacancy rate declined by 10 basis points (bps) to 6.7 percent in Q1 2015. In the U.S., the vacancy rate fell for the 21st straight quarter, down 10 bps to 7 percent. In Canada, the vacancy rate decreased by 10 bps to 3.8 percent.
- Net absorption in North America in Q1 totaled 63.1 million square feet (MSF), among the highest levels of quarterly absorption post-recession. U.S. absorption in the quarter was 58.6 MSF, up 21.4 percent year-over-year.
- Healthy occupier demand and the need for modern industrial space led to an upswing in construction in both the U.S. and Canada. 52.0 MSF was added to the industrial base in the first quarter, comprising 49.7 MSF in the U.S. and 2.3 MSF in Canada.
- The positive absorption and tightening market conditions in several key markets are pushing up industrial rents. The average U.S. asking rent for warehouse buildings rose to $5.16/SF NNN in Q1, up 2.1 percent quarter-over-quarter. Average asking rents are 13.9 percent higher than the market bottom reached in 3Q 2011.
- Some markets are seeing outsized increases in asking rents.
- The average asking rent for warehouse space in Q1 was up significantly year-over-year in the following markets: Oakland (25.6 percent), San Jose – Silicon Valley (24.6 percent), Denver (19.2 percent) and Detroit (16.9 percent).
- Bulk asking rents were up year-over-year in Waterloo Region, Ontario (24.3 percent); Miami (23.6 percent), Denver (18.5 percent) and Nashville (16.0 percent).
- Markets where flex/service asking rents were up year-over-year in Q1 include San Francisco (43.3 percent), Miami (20.7 percent), Ottawa (17.6 percent), Chicago (16.1 percent), San Diego (15.6 percent) and Cincinnati (15.5 percent).
- North American transaction volume hit a record high $17.5 billion in Q1 2015, according to data from Real Capital Analytics. This was driven by a handful of large portfolio sales, including Blackstone's $8.1 billion sale of its IndCor Properties unit to the Government of Singapore. The bulk of the volume—$17.2 billion—came from the U.S. while volume in Canada was $329.1 million.