KEY TAKEAWAYS

  • A surge in e-commerce sales is forcing retailers and wholesalers to modernize the supply chain and relocate to contemporary distribution centers near population centers or inland ports suitable for reaching consumers quickly.

  • Vacancy rates declined versus mid-year 2015 in 84% of the markets we track. At mid-year, only 6.0% of the nation’s industrial space is vacant, which is the lowest rate on record.

  • Vacancies dropped despite the 63 million square feet (MSF) of new supply completed in Q2—a new record topping last quarter’s 60 MSF. Development is not expected to ease any time soon, with 204 MSF now under construction.

  • Strong leasing and lower vacancies, especially in modern class A distribution centers, drove up asking rents to $5.66 per square foot per year (PSF/YR)—an all-time record for the country (not adjusted for inflation).

  • Despite weak GDP growth in the first half of the year, consumer spending has been solid. In Q2 we saw an annualized growth rate of 4.2%—the highest since 2014. Major contributing factors include accelerating job growth as well as the continued recovery in housing markets.
  • Investment volume declined for the second consecutive quarter to $12 billion, bringing the year-to-date total to $26 billion. Lower transaction volumes were not due to a lack of demand but rather because of the lack of large, national portfolio sales that made 2015 a record-breaking year for industrial investment.