Dallas-Fort Worth:
The Dallas/Fort Worth industrial market absorbed more than 1.7 million square feet during the second quarter, slightly lower than the 2.0 million square feet absorbed in the first quarter. The demand trend indicates steady tenant interest in the Metroplex, notably among the general warehouse category, which contributed 2.4 million square feet towards the positive absorption. Spurred by the ongoing quest for the greater energy efficiency found in the structure and design of newer product, tenant demand for warehouse-distribution space continued despite the economic downturn and general softening of the overall industrial vacancy rate. By contrast, R & D;, flex and light-assembly properties have been hit hard by the problems in the manufacturing and technology sectors, resulting in negative 716,475 square feet of absorption during the second quarter. Demand for industrial investment properties such as R & D;, flex and manufacturing facilities, is likely to retreat until the large inventories of new construction return to normal levels. Conversely, warehouse and distribution properties are expected to remain attractive investment options. Investor interest in such properties is due mainly to buyers seeking modern facilities in major transportation hubs such as Dallas-Fort Worth. Many tenants realize a cost savings from a more efficient distribution and light-assembly operation, subsequently propping up absorption and rents, while enhancing the investment value of the property.
Denver:
Although Colorado has not been immune from corporate downsizing, the industrial market appears to be faring better than its office counterpart in the national slowdown. One bright spot is the Northeast market which continues to be the catalyst for the rest of the metro area. While most of the other submarkets tallied negative absorption, the Northeast posted 117,332 square feet of positive absorption during the second quarter. However, not surprisingly, the metro area watched its vacancy rate climb 60 basis points to 6.3% as an additional 550,000 square feet was added back to the market during the second quarter. Nevertheless, annual asking lease rates managed to increase 8 cents to $6.98 during the quarter. While the market has cooled when compared with the unbridled growth of the past few years, Denver’s location, access to highways, and quality of life, should help the industrial market maintain a fairly healthy outlook.
El Paso:
The national economy caused several companies to vacate industrial facilities in El Paso. Existing companies leased the space to expand their warehouse facilities. The lack of new construction combined with steady absorption of industrial space will push occupancy rates up.
Eugene:
Vacating industrial space seemed to be one of the hottest things going in the second quarter in the Metro Eugene industrial market. In a recent survey Grubb & Ellis Northland conducted on the industrial market we found 1 million vacant square feet in the Metro Eugene market. This as a result of a weakening local economy, especially in the manufacturing sector.
Fresno:
The energy problem in California has had an effect on the local industrial market. Activity has slowed. A few tenants are moving around, but there has been little in the way of net expansion.
Houston:
Five warehouse-distribution facilities added a total of 416,378 square feet to the industrial inventory during the second quarter. The largest was the Portofino Technology Center, approximately 151,800 square feet in The Woodlands. Fifty-five percent of the new product was concentrated in the Southwest Far submarket throughout two projects,Techway Southwest Business Park and Glenmont Business Park,while two buildings in the Northwest Far submarket totaled 35,000 square feet of new space. The fact that the vacancy rate has consistently remained less than 8%, and even dropped to 7.1% in the second quarter as a large amount of construction entered the market, bears out the confidence that developers have shown. Nearly 25% of the 5.7 million square feet of industrial product under construction has been preleased, 64% of which is scheduled for completion in the third quarter.
Las Vegas:
The Northeast submarket showed the greatest expansion in the second quarter, due in part to land prices. The Southwest submarket showed absorption figures meeting vacancy rates due in large part to call centers and dot-coms leaving. The overall increase in vacancy and rental rates can be attributed to space being converted to accommodate call centers.
Oakland-East Bay:
The market has slowed, and vacancy has increased. Net absorption has been negative. Construction and asking rents are down.
Phoenix:
The Phoenix industrial market defiantly softened during the first half of 2001. All of the indicators for a weaker market were in place as vacancy rates rose, absorption numbers were negative, large chunks of sublease space became available, rents flattened, concessions became commonplace and new construction had very little pre-leasing. The sky has not completely fallen, as much of this slowdown is directly related to national economic conditions. Many of the very positive factors such as a strong housing market and population growth, job growth and low unemployment, low cost of living and available land are still driving the Phoenix Industrial market.
San Antonio:
San Antonio’s industrial market continues to perform within a cooling trend that began late last year, yet with some cautious optimism. Industrial vacancy rates have risen steadily from 13.5% in the second quarter of 1999 to 16.6% 24 months later. The continued decline in manufacturing, posting job losses again in July, along with a volatile stock market coupled with falling consumer confidence levels are evident in the performance of San Antonio’s industrial market, where demand is clearly off from this period last year. The upside is that new construction is minimal, with no speculative space in the near pipeline.
San Jose:
Availability has been increasing at an average rate of 1%, or about 2.5 million square feet, per month since the year began. Approximately 60% of this is space made available for sublease, as companies are either scaling back their operations or reassessing their space needs that they estimated during last year’s bull market. Asking rents have been cut in half in many submarkets since last year’s peak, but there’s still no demand for space. Many tenants are opting for renewals or extensions,at least in the short term, while they wait to see how the high-tech economy fares over the next year.
Seattle:
The Puget Sound region’s industrial vacancy rate continued its climb during the second quarter, reaching 6.4%, its highest level since 1998. The nationwide manufacturing slowdown, primarily focused on the industrial Midwest, resulted in 5,800 job losses in Washington state during the first quarter. This, coupled with financial difficulties in the e-commerce sector, has significantly reduced demand for warehouse-distribution space in the region. Moreover, the contraction in the telecommunications industry, which had fueled much of the demand for warehouse-turned-data center space, has also affected the industrial market. n
