Magazine article Mortgage Banking

Despite GDP Growth, Industrial Lags Recovery

Magazine article Mortgage Banking

Despite GDP Growth, Industrial Lags Recovery

Article excerpt

Industrial property vacancies increased to 10.5 percent in the third quarter, according to Colliers International, New York. The cyclical low for industrial vacancies previously stood at 7.9 percent. However, vacancies increased eight consecutive quarters, up by 1.9 percent from the past year.

"The U.S. warehouse market showed ongoing weakness in the third quarter, with vacancies up, absorptions negative and construction completions/construction under way at the lowest levels our researchers have ever witnessed--which is no surprise, given the ongoing recession and stagnating economic landscape," said Ross Moore, executive vice president and director of market and economic research at Colliers.

Industrial net absorption for the quarter measured -47.3 million square feet (msf). Industrial absorption in the United States, at -132.4 msf year-to-date, included Chicago with -18.4 msf; Los Angeles Basin at -20.4 msf; and San Jose/Silicon Valley, California, at -9.6 msf.

Real Capital Analytics Inc. (RCA), New York, said third-quarter sales of significant industrial properties were $1.5 billion, off 35 percent from the prior quarter, and the only property type that displayed slower transaction activity versus the second quarter.

"Volume remains at depressed levels; just $5.3 billion of industrial properties have sold year-to-date--off 72 percent from a year ago and 87 percent from two years ago," said Robert White, president of RCA. "In addition, volume in September, at just $400 million, was the lowest month for sales activity this year, and perhaps of the decade. Many markets had no significant industrial sales at all in the third quarter, such as Raleigh [North Carolina]; Salt Lake City; Sacramento [California]; Richmond [Virginia]; Kansas City; Denver; Portland [Oregon]; and the Washington, D.C., suburbs. White said industrial properties listed for sale more than tripled closing levels at $4.6 billion as the usual "seasonal surge" experienced in September did not materialize.

"New offerings actually dropped significantly, perhaps indicating sellers are being more realistic about current prices," White said. However, gross domestic product increased 3.5 percent, according to the Commerce Department. The economics group at Wells Fargo Securities, San Francisco, said business investment continued to improve for equipment while weakness persisted for nonresidential construction, which traditionally lags a recovery. …

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