After a strong first quarter where demand registered over 3 million square feet, 495,455 square feet was returned to the market this quarter. While not as impacted as the office market this drop was likely do to COVID-19 repercussions.
Warehouse space accounted for negative 831,814 square feet of net absorption. It was offset some by positive absorption in both manufacturing and office services where 313,027 and 40,425 square feet were registered respectively.
With just over 2 million square feet delivered to the market and few ground breakings in the second quarter of 2020, total square feet under construction ended the quarter at 2.9 million square feet. COVID-19 likely had an impact in the lack of new projects breaking ground as well. At its peak in the third quarter of 2019 there was 9.1 million square feet under construction.
Vacancy & Rental Rates
With the delivery of a substantial amount of space, coupled with negative absorption, vacancy increased by 90 basis points to end the quarter at 9.3 percent. Vacancy is at the highest level since the fourth quarter of 2016.
Asking rental rates increased to end the quarter at $6.55 per square foot triple net, up from $6.37 the previous quarter. As new product continues to come to market rental rates for the new space are pushing average rates upwards.