From wikiMHEDA
Material Handling Headlines
Warehouse Demand Drops
- 5/5/2009Absorption, or the net change in occupied space, fell dramatically during Q1, with more than 50 million square feet (msf) of warehouse space returned to the market. Major markets contributing to this give-back included Los Angeles, Chicago, Phoenix and San Jose. Indeed, only nine of the 56 industrial markets surveyed by Colliers showed positive absorption during the first quarter—a whopping 47 markets posted a drop in occupied space. This significant Q1 drop in industrial absorption mirrors the dismal showing made by U.S. office markets during the same timeframe.
In terms of new supply, 30.1 msf was added to the warehouse market during Q1—a sizeable decline from the previous quarter and the lowest supply injection since Q1 2005. During this same cycle, construction peaked at 55.5 msf in Q4 2007.
As for industrial space under construction, market conditions certainly did little to encourage new projects, and the amount of development underway in Q1 fell to 47.0 msf—down roughly 30% from the 66.4 msf under construction at year end 2008, and considerably down from Q3 2007, when a notable high of 153.7 msf of space was under construction.
Weakening demand took its toll on warehouse rents, which posted a decline in the January through March period, and came in at $5.35 per square foot (psf). This represents a 2.8% decrease from Q4 2008, and a 4.8% decrease from the year-ago quarter.
The first three months of 2009 were marked by slumping demand drivers, and this was best exemplified by the March ISM (Institute for Supply Management) manufacturing index—which registered 36.3—a slight improvement from February, but far below the psychological "50" level, which indicates expansion. This underscores how the manufacturing sector continues to experience substantial contraction, while construction, housing, the auto sector and the retail sector all face similar downward pressure as well.
"The warehouse leasing market took a big hit this quarter as the U.S. economy continued its rapid downward spiral," remarks Ross Moore, executive vice president and director of market & economic research at Colliers International. "Key sources of weakness included manufacturing and the auto sector, with output dropping dramatically over the past three months. In addition, trade volumes remained depressed. February exports were up slightly relative to January; however, year-over-year export volumes are down 22%. On the flip side, February imports were down 33%. Inventories continue to drop, and marked their sixth consecutive month of decline in March. All this causes hefty downward pressure on the warehouse market, and we expect leasing conditions to remain sluggish until at least the end of 2009."
RSS Feed
|
|
||||||||||||||||||||||||||||||||||||||||||
