The Q2 2016 U.S. Industrial Market Outlook Report

admin  /   September 8, 2016

The U.S. industrial market continued its exceptionally positive run during the first half of 2016. The supply chain renaissance in the U.S. is creating remarkable fundamentals, including the lowest vacancy rate, most positive absorption, greatest new supply, highest asking rents and most product under construction ever recorded.



  • E-commerce sales rose an impressive 15% in the first quarter of 2016 compared with the same time period last year. The surge in e-commerce sales is forcing retailers and wholesalers to modernize the supply chain. This includes relocating to distribution centers with contemporary material-handling capabilities that are near population centers or inland ports suitable for reaching consumers quickly.
  • Vacancy rates declined versus mid-year 2015 in 84% of the markets we track. At mid-year, only 6.0% of the nation’s industrial space is vacant—the lowest rate on record.
  • Vacancies dropped despite the 63 million square feet (MSF) of new supply completed in Q2—a new record topping last quarter’s 60 MSF. Development is not expected to ease anytime soon, with 204 MSF now under construction. 
  • Strong leasing and lower vacancies, especially in modern class A distribution centers, drove up asking rents. In Q2, asking rents reached $5.66 per square foot per year (PSF/YR), which is an all-time record for the country (not adjusted for inflation). Asking rents for distribution space increased year-over-year in 87% of the markets we track. 
  • Despite weak GDP growth in the first half of the year, consumer spending has been solid.In Q2 we saw an annualized growth rate of 4.2%—the highest since 2014. Major factors include accelerating job growth as well as the continued recovery in housing markets, leading to increased consumer spending and confidence. 
  • Investment volume declined for the second consecutive quarter to $12 billion, bringing the year-to-date total to $26 billion. Lower transaction volumes were not due to a lack of demand but rather because of the lack of large, national portfolio sales that made 2015 a record-breaking year for industrial investment.


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