The appetite of internet-based sellers and other retailers for newly built logistics properties drove net absorption of industrial real estate to its highest total since early 2000 during the third quarter.
In addition, e-commerce demand in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – appears to be taking a bite out of retail construction and shifting it to the logistics sector. The 53 million square feet of new logistics space delivered by developers in the third quarter was the second-highest quarter on record.
The large amount of new supply in the U.S. and Philadelphia commercial real estate market kept in balance with strong demand as logistics tenants absorbed 56 million square feet of warehouse and distribution buildings, said CoStar’s just released Third Quarter 2016 Industrial Real Estate Review and Forecast.
This report, related to both national and Philadelphia commercial properties, was made available through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
Strong leasing and absorption of logistics buildings currently available in the U.S. and Philadelphia commercial real estate market pushed the country’s logistics vacancy rate down to 7.1%, lower than at any point during the past two real estate market cycles, while year-over-year rent growth remained off the charts at 7.1% for light industrial and 6.4% for logistics assets.
Even by the projected end of the current cycle in 2020, CoStar forecasts the logistics vacancy rate in the 54 largest U.S. markets will rise only to 8.5%, nowhere near its 10.4% average since 2000.
Despite strong demand and sustained rent growth in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – rising levels of new construction paired with the gradually tightening availability of construction financing is beginning to put pressure on vacancies in a growing number of markets as the expansion phase of the logistics market starts to wind down. Thirty of the top 54 U.S. markets posted declining occupancy and rising rents in the third quarter, the most of any major property type.
The demand and absorption drivers for logistics space remain solid. Retail inventories relative to sales are at their highest levels since 2009 as Amazon.com and other e-commerce operations locate their inventories closer to population centers in the effort to speed goods to the consumer at ever-increasing rates.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) Leor Hemo (leor.hemo@wolfcre.com) or Lee Fein (lee.fein@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
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