Below are my notes from the CoStar Industrial Call today covering the entire US Industrial Market. Let me know if you have any questions or would like to discuss.
Here is a link for a copy of the slides from the presentation for your reference: click HERE
Summary
Economy:
The talk of tapering has caused interest rates to rise 100 bps in the last year.
GDP:
3.2% as of this morning. Expecting GDP to continue to rise. Many positive signals: goods consumption, purchasing managers index, industrial production index, port traffic, truck tonnage and housing starts are all on the rise
Absorption:
Haven't seen these levels of absorption since 2007.
The best performing markets are: Dallas, Inland Empire, Chicago, Atlanta and Columbus The worst performing markets are: Minneapolis, Lakeland, Birmingham, Augusta and Hartford
Supply:
80 million SF were delivered in 2013, currently there is 98 million SF under construction. 18 of those buildings are over 900,000 SF.
Vacancy - National vacancy rate is 8%
Rent Growth:
2.5% across the country, 141 markets improved and only 69 markets declined. Investors are pricing significant rent growth to justify high 4% CAP rates in coastal markets which are supply constrained.
Notable Rent Growths:
Edison had 9.6%, LA had 8.9%, Orange County had 7.9%, Miami had 7.5%, Dallas-Fort Worth had 6.8%
Market Fundamentals:
Approaching late expansionary phase for many top markets, but still feel we have room for more rent growth especially because of how low rental rates went. still expect strong rent growth until 2015 when markets will start hitting previous peaks.
Construction:
Rents are starting to justify new construction. Rents are approaching the long term trend line. Anticipate 4% rent growth next year.
Capital Markets and Sales Volume:
Up 22% year over year sales volume. CAP rates are in the mid-6% range. Lots of rents and appreciation upside in class B&C industrial, 28' clear and below.
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