The industrial real estate market had another big batch of data for the second quarter, according to data released this week by Los Angeles-based industrial real estate company JLL.
In its US Industrial Q2 Outlook 2021, JLL highlighted various highlights, including:
- the quarterly vacancy rate reaches one of its lowest quarterly averages, at 4.8%;
- among the highest quarterly rents on record, at $ 6.62 per square foot, and annual rents increasing at a rate of 5.1%, with JLL expecting industrial rents to continue growing between 4% and 7%;
- and logistics and distribution were the top line of business for the quarter, accounting for 60.7 million square feet of leases, for the second quarter, and 24.9% of total rental volume for the first half of 2021
In the report, Mehtab Randhawa, director of U.S. industrial research at JLL, wrote that the combination of rental and construction activity during the quarter helped boost industrial real estate, with availability of extremely tight market, due to the historic low vacancy rate and new markets. high rents. Additionally, she added that as steel shortages and fluctuating prices continue, the impact on the construction pipeline has been minimal, which saw 69 million square feet delivered in the second quarter.
“With increased competition in the industrial market, buildings do not sit vacant for long and vacancies continue to decline as available supply decreases,” said Randhawa. “As a result, tenants may find that they have to sacrifice certain needs, whether it’s building features or location, when looking for space. The industrial leasing environment in Q2 2021 seemed to favor landlords, giving them the ability to work with tenants on lease terms and contracts. Average lease terms have remained constant for tenants (68 months), in part due to the substantial increases in rents observed in the markets over the past decade and the location compromise that some tenants have to make in the short term by due to the limited options available in the market. “
The impact of supply chain and logistics operations was predominant in the report, with JLL observing that as port dwell times decreased, rail journey times began to increase, lack of space to container storage being a bottleneck. And the company added that today more than ever, urban logistics is at the forefront and the demand for third-party logistics companies to handle the distribution, warehousing and fulfillment of goods has become essential to keep up with the trends. consumer purchasing habits.
“Rapid changes in consumer purchasing habits continue to increase pressure on the global supply chain and continue to dramatically increase the volume of goods imported into the United States,” said Randhawa and Kelsey Rogers, Analyst Senior Researcher, Industrial, Americas at JLL. “As a result, the demand for container storage space continues to grow. Additionally, current zoning barriers and limited capacity may impact future demand for container storage space. For occupiers, it is essential that they assess their current supply chains. It is even more important now to see where the occupants source and distribute their goods. Investments in supply chains have steadily increased over the past decade. These disruptions (shipping traffic jams, weather disruptions, etc.) add pressure to shift the global supply chain and call on occupants to keep their inventory closer to avoid future disruptions.
With net absorption exceeding deliveries – over 69 million square feet have been delivered – and 408.6 million square feet currently under construction, JLL said the pipeline shows no signs of slowing down, which could lead to a shortage. supply potential linked to the continued increase in demand for industrial products. For the second quarter, net absorption was close to an all-time high, at 107 million square feet, and year-to-date it stands at nearly 200 million square feet and is at levels 2020 graduates.
“In the short term, the industrial pipeline has 408.6 million square feet currently under construction, this will help meet much of the demand that we are seeing,” said Randhawa and Rogers. “The long-term effects of net absorption exceeding deliveries include limited supply for tenants, as well as limited availability of land. As a result, this could increase competition on the leasing side and justify an under-supplied industrial market. “
About the Author
Jeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics management, Modern material handling, and Supply chain management review. Jeff works and lives in Cape Elizabeth, Maine where he covers all aspects of the supply chain, logistics, freight transportation and material handling industries on a daily basis. Contact Jeff Berman