1). Strong supply and demand characteristics The industrial real estate sector currently benefits from stable, healthy demand and an increasingly constrained supply of high quality space. The national vacancy rate has slowly declined from its 2010 peak to reach 9.1 percent, a level last seen in 2009. Given a rather nominal, but still steady, amount of positive net occupancy, it has fallen by 90 basis points from the first quarter of 2011, when the figure was at 10 percent. Now it is moving toward pre-recession levels of 7.5 percent.Demand has maintained a stable trajectory, marked by eight consecutive quarters of positive net absorption, but at 25.3 million square feet (s.f.) in the first quarter, it remains well below pre-recession levels. However, a spike in demand for 'big-box' distribution and logistics space (>400,000 s.f.), has re-introduced speculative development in key hub markets where vacancy has decreased significantly. While in the meantime, a renewed confidence from corporations has triggered a meaningful flow of build-to-suit activity. Vacancy in the big box market is running at less than 3 percent in a number of the major logistics markets in the U.S. Strong demand over the last two years has nearly burned off all existing Class A product in these locations.
Five Factors Driving U.S. Industrial Real Estate Market's Resurgence
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