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Colliers na industrial_2013_q1_final
1. Blind Spots
Eight innings into a “perfect game,” what could
go wrong in this environment of low interest rates,
vacancy and cap rates?
HIGHLIGHTS
NORTH AMERICA
WWW.COLLIERS.COM
Q1 2013 | INDUSTRIAL
N.A. INDUSTRIAL MARKET
SUMMARY STATISTICS, Q1 2013
US
Q1
2013
US
Q2
2013*
Canada
Q1
2013
Canada
Q2
2013*
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE**
*Projected, relative to prior period
**Warehouse rents
MARKET INDICATORS
Relative to prior period
US CAN NA
VACANCY RATE (%) 8.68 4.13 8.20
Change from Q4 2012 (%) -0.21 -0.12 -0.20
ABSORPTION (MSF) 47.4 3.1 50.5
NEW CONSTRUCTION (MSF) 18.1 1.9 19.9
UNDER CONSTRUCTION (MSF) 61.8 13.8 75.6
ASKING RENTS
PER SF (USD/CAD) US CAN NA
Average Warehouse/
Distribution Center 4.77 7.62 5.21
Change from Q4 2012 (%) 1.58 0.81 1.29
K.C. CONWAY Chief Economist | USA
KEY TAKEAWAYS
• Can the “perfect game” continue into the ninth? For the eighth straight quarter, the North
American vacancy rate declined in the 77 markets tracked by Colliers. Q1 vacancy is down
20 basis points to 8.20% (8.68% among the primary 65 U.S. markets and 4.13% among the
12 primary Canadian markets).
• Check your “blind spots.” We weigh some potentially overlooked risks to industrial’s stellar
performance, including cap rate compression, due diligence risk, and increased construction
activity. See “Blind Spots” on page 9 for the full list.
• Absorption remains strong vs. job growth. Despite anemic job growth below 200,000 per
month, demand for industrial warehouse space and modern distribution centers remains strong.
On the heels of nearly 71 MSF of net absorption in Q4 2012, the market absorbed another
50.5 MSF in Q1 2013.
Sq. Ft. By Region
Absorption Per Market (SF)
q4 '12 - q1 '13
6,000,000
3,000,000
600,000
-600,000
-3,000,000
-6,000,000
4 billion
2 billion
400 mil
Occupied Sq. Ft.
Vacant Sq. Ft.
NORTH AMERICAN INDUSTRIAL VACANCY, INVENTORY AND ABSORPTION | Q1 2013
2. P. 2 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
• Inland MSAs outpacing port markets in absorption. Other than Los
Angeles, the leadership in warehouse leasing is coming from the
inland distribution markets. The top five markets for net absorption in
Q1 2013 were Chicago, LA, Atlanta, Detroit and Cincinnati.
• New Supply is picking up, but is neither excessive nor speculative.
New industrial construction this quarter increased by one-third to
40.6 MSF. But put in perspective, this is less than quarterly average
net absorption from Q1 2012 to Q1 2013 (45 MSF). And, more than
half of this new space is pre-leased or build-to-suit distribution
centers for major retailers and manufacturers.
• Cap rates continue to compress and warehouse prices rise due to
increasing investor demand for warehouses. As institutional
investors become anxious about the multifamily market and take
note of industrial’s perfect game in the making, demand for modern
warehouse properties in core port and inland distribution markets
is on the rise.
The “Perfect Game”
Over the last two years, North American industrial warehouse markets
have pitched a “perfect game” through the eighth inning, to use a baseball
analogy. The property type has seen eight successive quarters of declining
vacancy rates, with net absorption outpacing new supply more than 2:1.
Recognizing that Canadian markets account for only 10 percent of the
North American warehouse space—and these 12 markets have maintained
a stable vacancy rate of approximately 5% with relatively no new supply—
the improvement in these metrics has largely occurred in the primary 65
U.S. warehouse markets. Here’s what that looks like:
Any time economic growth and commercial real estate performance are
disconnected, it usually ends badly when we find that we all had a blind
spot for some artificial stimulus. Prior to 1987, it was an historic change in
And industrial warehouse isn’t doing it alone: other property types on
the commercial real estate “team” are backing up the industrial pitcher
with all-star numbers in key supply and demand metrics, resulting in cap
rate compression to record-low levels. And U.S. equities have turned in an
even stronger performance: The Standard & Poor’s (S&P) 500 index is up
an astonishing 800 percent from its 2009/2010 lows, and 17 percent this
year alone.
10.56 10.29 10.01 9.77 9.68 9.43 9.22 8.89 8.68
10.56 10.29 10.01 9.77 9.68 9.43 9.22 8.89 8.68
8.25 pt
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013
Vacancy%
Absorption MSF Completions MSF Vacancy %
U.S. INDUSTRIAL WAREHOUSE PERFORMANCE | PAST NINE QUARTERS
-10
-8
-6
-4
-2
0
2
4
6
3.6
Q1 2011 - Q2 2013
3
1.7
-1.8
-3.7
-8.9
-5.3
1.3 1.4
4
2.3 2.2 2.6 2.4
0.1
2.5
1.3
2
1.3
3.1
4.1
-0.3
0.4
2.5
2008 2010 2012
2008 2010 2012
Hardly a “perfect performance”
for U.S. economic growth...more
like a roller coaster.
UNITED STATES GDP GROWTH RATE (% CHANGE)
SOURCE: www.tradingeconomics.com | Bureau of Economic Analysis
So, as the pitcher takes the mound in the ninth, we wonder if he can close
out the perfect game. We do our best not to jinx him by thinking of what
might go wrong, but sometimes we can’t help ourselves. A USA Today
article by Adam Shell (“With stocks this hot, why worry?”), published as
this report was going to press, assessed concerns over whether the stock
price eruption is another bubble, or solidly rational. Bloomberg published a
similar piece on the paradox of how sustained good news makes us
nervous, and gave a “Worry List” of economic factors that could reverse
the seemingly vertical trend in stock values.
Jinx or no, these are reasonable concerns given how real estate values
across all asset classes—industrial especially—have climbed in a relatively
short period. So, what are the potential “blind spots” that conceal risks
to industrial’s perfect game?
The Economy
GDP, Jobs and Industrial Warehouse Demand
Let’s start with a quick review of key industrial economic measures to
understand the plot behind this historic performance so far.
U.S. GDP and industrial real estate have been out of sync since the
2008-2009 financial crisis. This decoupling is contrary to all previous
U.S. economic recoveries. Every time GDP has appeared poised for a
momentous upward trend in the past three years, it collapses back in the
next one to three quarters, to just 0.1%–1.3%. And this roller-coaster ride
of economic activity is despite record liquidity infusions into the U.S.
economy by our central bank, the Federal Reserve. What does this pattern
in GDP mean for U.S. industrial real estate?
Should we be concerned? Yes—but for the near term it may not matter.
However, in the long run it matters a lot.
Visitor 0 0 0 0 0 0 0 0
Home 0 0 0 0 0 0 0 0
0
0
3. HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 3
the tax laws that ended investors’ ability to use real estate losses to offset
gains in other investments, which in turn led to an S&L and real estate
crisis. Pre-2007, the artificial stimulus was easy credit for housing and
commercial real estate (subprime and securitizable, financially engineered
mortgage-products), which overstimulated housing construction, elevated
home ownership rates and lifted CRE values to record levels—until it all
came crashing back to Earth.
Today, our government and central bank are playing a game of chicken,
pitting the Federal Reserve’s zero-interest rate monetary policy against
accelerating fiscal deficits in Congress, which hopes to reach top speed
(i.e., full employment) before both vehicles collide. Investors and asset prices
are caught in the middle, and the natural response is to jump out of the way.
This flight from bonds, sovereign debt, and cash will end badly with a thing
called inflation. This explains why industrial and other commercial real
estate assets are thriving in a weak GDP environment as investors look for a
safe haven from fiscal deficits and inflationary monetary policy.
The other half of the story, though, is more encouraging: on-shoring,
or the return of manufacturing that left the U.S. over the past three
decades. This manufacturing renaissance in the U.S. is due to many
factors: patent protection, cheap and reliable energy, and technology and
robotics that enable 80+ percent automation of factories. Automation
60.0%
44.4%
33.3%
61.9%
33.3%
50.0% 47.1%
0%
20%
40%
60%
80%
100%
Midwest Northeast South West Canada U.S. N.A.
Expand Hold Steady Contract
8.3% 1.4%
40.0%
55.6%
66.7%
38.1%
58.3%
50.0% 51.4%
8.3% 1.4%
40.0%
55.6%
66.7%
38.1%
58.3%
50.0% 51.4%
OF THE LEASES SIGNED THIS QUARTER*, DID MOST TENANTS...?
80.0% 77.8%
55.6%
71.4%
33.3%
69.0% 62.9%
80.0% 77.8%
55.6%
71.4%
33.3%
69.0% 62.9%
10.0%
22.2%
44.4%
23.8%
50.0%
27.6%
31.4%
10.0% 4.8%
16.7%
3.4% 5.7%
10.0%
22.2%
44.4%
23.8%
50.0%
27.6%
31.4%
10.0% 4.8%
16.7%
3.4% 5.7%
0%
20%
40%
60%
80%
100%
Midwest Northeast South West Canada U.S. N.A.
Down Same Up
3-MONTH FORECAST FOR VACANCY LEVELS (relative to current quarter)
1.7%
8.3%
2.9%
63.8%
41.7%
60.0%
12.1%
8.3%
11.4%
22.4%
25.0%
22.9%
16.7%
2.9%
0% 20% 40% 60% 80% 100%
U.S.
Canada
N.A.
Declining Bottoming No Clear Direction Increasing Peaking
63.8%
41.7%
60.0%
8.88 pt
1.7%
8.3%
2.9%
CHARACTERIZE CURRENT INDUSTRIAL RENTS IN YOUR MARKET
4.8% 8.3% 1.7% 2.9%4.8% 8.3% 1.7% 2.9%
60.0%
33.3%
44.4% 33.3%
75.0%
41.4%
47.1%
60.0%
33.3%
44.4% 33.3%
75.0%
41.4%
47.1%
40.0%
66.7%
55.6% 61.9%
16.7%
56.9% 50.0%
0%
20%
40%
60%
80%
100%
Midwest Northeast South West Canada U.S. N.A.
Down Same Up
3-MONTH FORECAST FOR RENTS (relative to current quarter)
*Excluding renewals
has reduced the importance of the labor cost issue in manufacturer’s
calculations. What’s more, retailers and manufacturers are realizing that
they need to make substantial capital investments in their supply-chain
infrastructure to capitalize on new manufacturing efficiencies, and to
accommodate growth in e-commerce activity of 3–4 times today’s levels, or
10% of gross retail sales.
In other words, the good news for industrial real estate is that it’s not
just an artificial stimulus driving this performance. Since automation
allows us to produce goods for consumption by the global community—
particularly LATAM, Russia and non-Eurozone Europe—without significant
job creation, we can expect sub-trend GDP growth in perpetuity.
Here again, the Fed’s monetary policy and U.S. fiscal deficits will eventually
end badly.
The Institute for Supply Management’s (ISM) monthly Purchasing
Managers’ Index (PMI) documents manufacturing expansion during a
four-year period of sub-trend (i.e., below 3%) GDP and employment
growth. Over the course of the past 15 years, the PMI has dipped below 50
for a period of 6 months or more only twice: i) in 2001 following Y2K and
the onset of a brief technology recession, and after the 9/11 attacks; and ii)
Winter 2008 to Summer 2009, during the financial crisis. Since then,
manufacturing activity has expanded for 47 consecutive months.
% of Reporting Markets
% of Reporting Markets
% of Reporting Markets
% of Reporting Markets
4. P. 4 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
PURCHASING MANAGERS’ INDEX | HISTORICAL DATA (>50 INDICATES EXPANDING MANUFACTURING ECONOMY)
YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2013 53.1 54.2 51.3 50.7
2012 53.7 51.9 53.3 54.1 52.5 50.2 50.5 50.7 51.6 51.7 49.9 50.2
2011 59.2 59.6 59.3 59.4 53.5 55.8 52.3 53.2 53.2 51.5 52.3 52.9
2010 56.6 55.7 59.3 58.9 57.8 56.1 56.4 57.8 56.5 57.3 58.2 57.3
2009 34.9 35.5 36.0 39.5 41.7 45.8 49.9 53.5 54.4 56.0 54.4 55.3
2008 50.3 47.6 48.3 48.8 48.8 49.8 50.0 49.2 44.8 38.9 36.5 33.1
2007 49.5 51.9 50.7 52.6 52.5 52.6 52.4 50.9 51.0 51.1 50.5 49.0
2006 55.0 55.8 54.3 55.2 53.7 52.0 53.0 53.7 52.2 51.4 50.3 51.4
2005 56.8 55.5 55.2 52.2 50.8 52.4 52.8 52.4 56.8 57.2 56.7 55.1
2004 60.8 59.9 60.6 60.6 61.4 60.5 59.9 58.5 57.4 56.3 56.2 57.2
2003 51.3 48.8 46.3 46.1 49.0 49.0 51.0 53.2 52.4 55.2 58.4 60.1
2002 47.5 50.7 52.4 52.4 53.1 53.6 50.2 50.3 50.5 49.0 48.5 51.6
2001 42.3 42.1 43.1 42.7 41.3 43.2 43.5 46.3 46.2 40.8 44.1 45.3
2000 56.7 55.8 54.9 54.7 53.2 51.4 52.5 49.9 49.7 48.7 48.5 43.9
1999 50.6 51.7 52.4 52.3 54.3 55.8 53.6 54.8 57.0 57.2 58.1 57.8
1998 53.8 52.9 52.9 52.2 50.9 48.9 49.2 49.3 48.7 48.7 48.2 46.8
SOURCE: Institute of Supply Management
And, the most recent ISM PMI report shows continued growth in new orders, manufacturing employment, and manufactured exports.
MANUFACTURING AT A GLANCE | APRIL 2013
INDEX
SERIES
INDEX
APRIL
SERIES
INDEX
MARCH
CHANGE
(%)
DIRECTION
RATE OF
CHANGE
TREND*
(MONTHS)
PMI™ 50.7 51.3 -0.6 Growing Slower 5
New Orders 52.3 51.4 +0.9 Growing Faster 4
Production 53.5 52.2 +1.3 Growing Faster 8
Employment 50.2 54.2 -4.0 Growing Slower 43
Supplier
Deliveries
50.9 49.4 +1.5 Slowing From Faster 1
Inventories 46.5 49.5 -3.0 Contracting Faster 2
Customers'
Inventories
44.5 47.5 -3.0 Too Low Faster 17
Prices 50.0 54.5 -4.5 Unchanged From Increasing 1
Backlog of
Orders
53.0 51.0 +2.0 Growing Faster 3
Exports 54.0 56.0 -2.0 Growing Slower 5
Imports 55.0 54.0 +1.0 Growing Faster 3
OVERALL ECONOMY Growing Slower 47
Manufacturing Sector Growing Slower 5
SOURCE: Institute of Supply Management
What ISM Survey Respondents
Are Saying About Industry
SPRING 2013
“Production is still strong; several
new projects to support alternative
energy.” (Primary Metals)
“Automotive demand remains firm.”
(Fabricated Metal Products)
“Business continues at a steady
pace.” (Machinery)
“General business conditions and
industrial markets remain strong.”
(Transportation Equipment)
“Seasonal pick-up underway in
the office furniture industry.”
(Furniture & Related Products)
“Overall, volume is steady.
Q1 sales volume is lower than
projected.” (Chemical Products)
5. HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 5
US CAN NA
Vacancy Rate
Q4 2012 8.89% 4.25% 8.40%
Q1 2013 8.68% 4.13% 8.20%
Quarter over Quarter Change
(basis points) -21 -12 -20
NORTH AMERICAN INDUSTRIAL OVERVIEW | Q1 2013
MEASURE NORTH AMERICA CANADA UNITED STATES WEST/MIDWEST SOUTH NORTHEAST
# of Markets 77 12 65 35 21 9
Inventory (MSF) 16,276.8 1,721.3 14,555.6 8,095.2 4,219.8 2,240.6
% of N.A. Inventory 100.0 10.6 89.4 49.7 25.9 13.8
New Supply (Q1-2013 MSF) 19.9 1.9 18.1 9.7 5.7 2.6
% of N.A. New Supply 100.0 9.4 90.6 48.5 28.8 13.3
Vacancy (%) 8.20 4.13 8.68 8.04 9.44 9.56
Absorption (MSF) 50.5 3.1 47.4 29.7 13.4 4.2
% of N.A. Absorption 100.0 6.2 93.8 58.9 26.6 8.4
Leadership Markets Absorption:
Toronto, Calgary
and Vancouver
Absorption, Top
5: Chicago, LA,
Atlanta, Detroit and
Cincinnati
Absorption,
Midwest Top 5:
Chicago, Detroit,
Cincinnati,
Cleveland and
Kansas City.
Absorption, West
Top 3: LA, Phoenix
and Seattle.
Absorption, Top 5:
Atlanta, Memphis
(#1 Air Cargo in
world), Charlotte
(housing recovery),
Jacksonville and
Houston (key port
markets).
Leasing activity,
Top 3: Baltimore
(newest post-
Panamax port),
Philadelphia
(energy) and
Pittsburgh.
Laggard Markets Absorption:
Montreal and
Waterloo (net
negative in Q1
2013)
Vacancy: Halifax,
Waterloo and
Ottawa (above 5%).
VACANCY
Vacancy continues to decline in North American warehouse markets—
in U.S. markets at twice the pace of Canadian markets, due to greater
oversupply and on-shoring of U.S. manufacturing. From a regional
perspective, Canada has the lowest average vacancy rate in North America
at 4.13 percent (down 12 basis points from Q4 2012), and the Northeast
U.S. has the highest vacancy rate at 9.56 percent (down 11 basis points
from Q4 2012). The West and Midwest are the only two regions in the U.S.
with vacancy rates below the 8.7 percent national average.
Behind the Statistics
& Beyond the Basics
Scope of Colliers Industrial Outlook Report: Colliers monitors industrial
property conditions in 77 North American markets from Miami to Montreal,
totaling 16.3 billion square feet of inventory. Approximately 90 percent
(14.6 billion square feet) of this inventory is located in the United States.
The West and Midwest regions constitute approximately half of North
American industrial warehouse space (8.1 billion square feet); combined,
they also account for approximately 60% of the annual net leasing
activity in North America. The South is the next-largest region, with
4.2 billion square feet, or 26% of North American industrial warehouse
space. The expansion of the Panama Canal—and the addition of at least
five more post-Panamax ports to the East and Gulf coasts—will only
enhance the market share of key inland and port distribution markets in
the Southeast and Southwest by 2015. With respect to the numbers for
Q1 2013, the table below tells the story:
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6. P. 6 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
Millions
-1.0 -0.5 0.0 0.5 1.0 1.5
Toronto, ON
Calgary, AB
Vancouver, BC
Edmonton, AB
Ottawa, ON
Regina, SK
Saskatoon, SK
Victoria, BC
Halifax, NS
Winnipeg, MB
Waterloo Region, ON
Montreal, QC
ABSORPTION (SF) | CANADIAN MARKETS | Q1 2013
-2.0 0.0 2.0 4.0 6.0 8.0
New Jersey – Northern
New Jersey – Central
Savannah, GA
Indianapolis, IN
Dallas-Ft. Worth, TX
Los Angeles – Inland Empire, CA
Los Angeles, CA
Detroit, MI
Atlanta, GA
Chicago, IL
Millions
ABSORPTION (SF) | SELECT U.S. MARKETS | Q1 2013
TOP 23 NORTH AMERICAN INDUSTRIAL MARKETS WITH
VACANCY BELOW NORTH AMERICAN AVERAGE
VACANCY
RANKING
MSA
Q1 2013
VACANCY
RATE (%)
MARKET
PROFILE
1
CANADA
Vancouver 3.5
3rd largest Canadian
industrial market
2 Toronto 3.9
Largest Canadian
industrial market
3 Montreal 4.5
2nd largest Canadian
industrial market
4 Calgary 4.7
4th largest Canadian
industrial market
5
UNITEDSTATES
Honolulu 3.6
Top-20 North American
port
6 Los Angeles 3.9
Busiest North American
TEU container port
7 Orange County 4.9 –
8 Houston 4.9
Busiest
Gulf Coast port
9 Long Island 5.4
Port of New York
influence
10 Seattle 5.7
Top-10 North American
port market
11 Kansas City 6.1
Top-10 North American
intermodal rail
12 Indianapolis 6.4
Developing intermodal
link to California
13 Milwaukee 6.5
Key Great Lakes region
port
14 Miami 6.6
Top-20 North American
port to Latin America
15 Portland 6.8
Top-20 North American
port – autos and
agriculture
16 Grand Rapids 7.1
Proximity to Great Lakes
ports & rail
17 L.A. Inland Empire 7.2
Top-5 intermodal rail
facility
18 Denver 7.3
Top-10 intermodal rail &
air cargo
19 Columbus, Ohio 7.8
Top-5 air cargo market;
link to port of Virginia
20 Cincinnati 8.1
Intermodal and rail
linkage to Canada
21 San Francisco Peninsula 8.2
Vital West Coast port
market
22 Cleveland, Ohio 8.4
Great Lakes and auto
manufacturing influence
23 New Jersey (Northern) 8.4
Port of New York
influence
#5–#23 are the 19 U.S. markets with a vacancy rate < U.S. average of 8.7%
ABSORPTION
It would have been a tall order for North American first-quarter warehouse
absorption to equal or exceed the 71 MSF achieved in Q4 2012. 2012’s net
industrial absorption was the best since the 2008–2009 financial crisis,
and Q4 net absorption accounted for 45 percent of CY 2012 net leasing
activity in aggregate.
However, despite the headwinds of the unresolved Fiscal Cliff, the deferred
International Longshoremen’s Association (ILA) strike along the East and
Gulf coasts, and more deterioration in Europe, Q1 2013 absorption turned
in a solid performance. Approximately 50 MSF of warehouse space was
absorbed—94% in the primary 65 U.S. warehouse markets. Which markets
outperformed and why?
As revealed by year-end vacancy statistics, there is a strong correlation to
port and intermodal markets, with three wrinkles:
• Detroit, Cleveland and Kansas City (influenced by the auto recovery)
• Charlotte & Phoenix (influenced by the housing recovery), and
• Baltimore (the newer of only two East Coast post-Panamax ports,
along with the Port of Virginia)
7. HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 7
From a regional perspective, net absorption is strongest in the Midwest
(17.5MSF) and South (13.4 MSF), led by Chicago, Detroit and Cincinnati
in the Midwest, and Atlanta, Memphis and Charlotte, NC, in the South.
Los Angeles, Phoenix and Seattle experienced the most net leasing
activity in Q1 along the West Coast, and Baltimore has taken over leadership
in the Northeast as America’s newest post-Panamax port, followed by
Philadelphia with energy trading activity along the Delaware River.
Inland markets this quarter outpaced port markets in absorption. The top
5 markets with respect to net absorption in Q1 2013 were:
Looking forward to 2013, delayed delivery of new space under construction
is the only significant obstacle to industrial leasing activity in key port and
intermodal markets such as Los Angeles, Seattle, Houston and Memphis.
These markets can’t complete new space fast enough to meet demand, and
market forces will likely result in disproportionately high 2H 2013 net
leasing activity, as was the case in 2012.
CONSTRUCTION ACTIVITY
Finally, eight innings into a perfect game, the bullpen is warming up as
new construction activity on the rise. Although there is a dearth of
product for sale, an estimated 40% of existing U.S. warehouse space is
functionally obsolete (less than 30-foot clear height, etc.). There is added
urgency on the part of retailers and manufacturers to occupy or build
modern distribution facilities aligned with key post-Panamax ports,
intermodal rail facilities, and air cargo/e-commerce fulfillment paths. In Q1,
new construction activity increased by 27 percent, from 32 MSF at
year-end 2012 to 40.6 MSF. The ten states with the most warehouse and
distribution center space under construction are Texas (7.0 MSF), New
Jersey (4.9 MSF), Georgia (3.6 MSF), Illinois (3.1 MSF), Pennsylvania (2.7
MSF), Ohio (2.3 MSF), Arizona (2.0 MSF), Florida (1.8 MSF), Utah (1.8
MSF), and California (1.2 MSF). [Source: Dodge Pipeline, Q1 2013]
In our search for blind spots, should this steep increase in new
construction be one such metric to monitor? While it’s worth tracking over
the next 3–5 quarters, investors and developers can take comfort in two
key metrics that put this construction activity in proper perspective. First,
40.6 MSF of construction is less than the average quarterly net absorption
over the previous four quarters; that is, leasing activity is outpacing new
construction underway four to one. Second, more than half of this new
construction is pre-leased or build-to-suit for owner occupancy by large
retailers and manufacturers. National retailers such as Amazon, Dollar
Tree, Family Dollar, FedEx, Home Depot, L’Oreal, Publix, O’Reilly Auto
Parts, Restoration Hardware, Target, Tractor Supply and Whole Foods are
constructing in excess of 20 MSF of modern distribution and logistics
centers from coast to coast. Here’s a sampling of these projects in the ten
states with the most new construction activity:
1 Chicago 6.0 MSF
2 Los Angeles 4.3 MSF
(2.05 MSF from Inland Empire)
3 Atlanta 3.0 MSF
4 Detroit 2.3 MSF
(Right-to-work is paying dividends in Michigan)
5 Cincinnati 2.1 MSF
Rounding out the top ten this quarter are Cleveland (1.9 MSF); Memphis,
Kansas City and Charlotte (each with 1.7 MSF); and Baltimore (1.5 MSF).
Why haven’t the big hitters (fiscal uncertainty, unemployment and labor
unrest) ended industrial’s perfect game? Because development and leasing
activity is fueled by distributors, manufacturers, retailers and shippers that
need to re-engineer their supply chains to gain efficiencies required in the
post-Panamax era, just two years away. Seven of the top ten U.S. markets
for both Q1 2013 and CY 2012 absorption were top-ten North American
port or intermodal industrial markets
MSA Q1 2013 (MSF) MSA CY 2012 (MSF)
1
Chicago
(INTERMODAL)
6.0 Chicago
13.438
(INTERMODAL)
2
Los Angeles
(PORT + INLAND)
4.3
Dallas/
Ft. Worth
9.728
(INTERMODAL)
3
Atlanta
(INTERMODAL)
3.0 Detroit
9.169
(AUTO-RECOVERY)
4
Detroit
(AUTO RECOVERY)
2.3
Los Angeles –
Inland Empire
8.470
(INTERMODAL)
5
Cincinnati
(MANUFACTURING)
2.1
Los Angeles –
Coastal
8.375
(PORT)
6
Cleveland (AUTO
+ GREAT LAKES)
1.9 Atlanta
7.400
(INTERMODAL)
7
Kansas City
(INERMODAL)
1.7 Houston
6.245
(PORT)
8
Memphis
(#1 AIR CARGO)
1.7 Phoenix
5.137
(HOUSING RECOVERY)
9
Charlotte, NC
(HOUSING)
1.7 Columbus
4.916
(AIR CARGO)
10
Baltimore-New
PPMX Port
1.5 Seattle
3.916
(PORT)
STATE
NEW
WAREHOUSE
CONSTRUCTION (MSF)
LARGEST
DISTRIBUTION CENTERS
UNDER CONSTRUCTION
Texas 7.0
Amazon: three 1.0+ MSF centers in
Dallas and San Antonio
Restoration Hardware: 850,000 SF in Grand
Prairie (Dallas, TX)
L’Oreal: 500,000 SF in suburban Dallas
New Jersey 4.9 Amazon: 1.0MSF in Trenton
Georgia 3.6
Home Depot: 1.0 MSF in Atlanta
Tractor Supply: 700,000 SF in Macon
(Atlanta area)
Illinois 3.1 Trader Joe’s: 800,000 SF in Chicago
Pennsylvania 2.7 PetSmart and Dollar General
Ohio 2.3 Tween: 750,000 SF
Arizona 2.0
American Furniture: 632,000 SF outside
Phoenix
Florida 1.8
Publix and O’Reilly Auto Parts:
Orlando and Lakeland
8. P. 8 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
ENGINEERING NEWS-RECORD’S CONSTRUCTION COST INDEX
YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVG
2013 9437 9453 9456 9484 9516 9542
2012 9176 9198 9268 9273 9290 9291 9324 9351 9341 9376 9398 9412 9308
2011 8938 8998 9011 9027 9035 9053 9080 9088 9116 9147 9173 9172 9070
2010 8660 8672 8671 8677 8761 8055 8844 8837 8836 8921 8951 8952 8799
2009 8549 8533 8534 8528 8574 8578 8566 8564 8586 8596 8592 8641 8570
2008 8090 8094 8109 8112 8141 8185 8293 8362 8557 8623 8602 8551 8310
2007 7880 7880 7856 7865 7942 7939 7959 8007 8050 8045 8092 8089 7966
2006 7660 7689 7692 7695 7691 7700 7721 7722 7763 7883 7911 7888 7751
2005 7297 7298 7309 7355 7398 7415 7422 7479 7540 7563 7630 7647 7446
2004 6825 6862 6957 7017 7065 7109 7126 7188 7298 7314 7312 7308 7115
2003 6581 6640 6627 6635 6642 6694 6695 6733 6741 6771 6794 6782 6694
2002 6462 6462 6502 6480 6512 6532 6605 6592 6589 6579 6578 6563 6538
2001 6281 6272 6279 6286 6288 6318 6404 6389 6391 6397 6410 6390 6343
2000 6130 6160 6202 6201 6233 6238 6225 6233 6224 6259 6266 6283 6221
INDEX METHODOLOGY: 200 hours of common labor at the 20-city average of common labor rates, plus 25 cwt of standard structural steel shapes at the mill price prior to 1996 and the fabricated
20-city price from 1996, plus 1.128 tons of portland cement at the 20-city price, plus 1,088 board-ft of 2x4 lumber at the 20-city price.
Despite the uptick in new warehouse and distribution center construction
in Q1, over-building risk remains low given the scarcity of debt capital for
speculative construction by banks, and the limited amount of speculative
warehouse construction underway. If net absorption were to slip over
the next three quarters, and new projects increased in each succeeding
quarter by the same amount as in Q1 2013, over-building would become
a concern in 2014.
One danger that spans all commercial property types is rising construction
costs. Because Colliers has elevated this item in prior Outlook reports,
it should come as no surprise that construction costs never actually
declined during the 2008–2009 financial crisis and ensuing recession. As
documented in Engineering News-Record’s Construction Cost Index,
construction costs have risen nearly 20% since Spring 2007, and are up
an additional 2.7% in June 2013 over June 2012. Investors and developers
considering new construction investments should budget construction cost
increases at double the Consumer Price Index (CPI) for 2H 2013 and
2014, due to pressures on labor and materials.
CONSTRUCTION COSTS
The CCI annual escalation rate inched up to 2.7% in June from 2.4% in May and 2.0% in March.
20-CITY: 1913 = 100
JUNE 2013
INDEX VALUE
% CHANGE
MONTH
% CHANGE
YEAR
Construction Cost 9542.33 +0.3 +2.7
Common Labor 20236.18 +0.3 +2.8
Wage $/Hour 38.45 +0.3 +2.8
Source: Engineering News-Record
WAREHOUSE TRANSACTION ACTIVITY
According to Real Capital Analytics and the Colliers’ Q1 Broker Survey,
Q1 2013 saw approximately $7.0 billion of industrial real estate
transactions, of which $4.8 billion was spent on acquiring pure warehouse
properties. Although that volume was a 16% increase over aggregate
Q1 2012 industrial property transactions, there was a 41% increase
in warehouse property sales alone. Clearly, investment capital has an
increased appetite for warehouse properties.
While some observations from the transaction data were predictable—
such as the predominance of sales activity in key Western markets like
Los Angeles (nearly $1.0 billion in total warehouse transactions)—other
observations are contrary to recent activity. In particular, the volume of
property sales in secondary and tertiary MSAs ($4.0 billion) outpaced
those located in core/primary MSAs ($3.0 billion). With anxiety growing
over whether the multifamily market is overheating, and industrial real
estate continuing its perfect game quarter after quarter, transaction
activity will remain robust for warehouse properties. The only limiting
constraint is likely to be a dearth of assets and portfolios for sale.
9. HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 9
Conclusion
The Blind Spots
So, what could disrupt this “perfect game” in industrial real estate? What
blind spots should we be aware of this year to avoid an ROI or NOI wreck
in 2014 or 2015?
BLIND SPOT #1: Favoring functionally obsolete warehouse space
over modern, in-demand, distribution centers in Post-Panamax era
supply-chain markets. A significant portion of existing U.S. warehouse
space is functionally obsolete (clear heights below 30 feet, less than
60-foot column spacing, etc.), or is located in markets that will not be
central to the post-Panamax supply chain. Modern distribution centers
need 30-foot clear ceiling height for conveyor systems, as well as
connectivity to post-Panamax ports via intermodal rail and proximity to air
cargo centers for e-commerce fulfillment. Distribution, logistic and
e-commerce fulfillment centers along the paths linking ports, intermodal
rail, and air-cargo are your geographic sign-posts and investment markers.
Be careful what physical product you invest in and where. Refer to Colliers’
1H 2013 North American Ports Outlook report at www.colliers.com/us/port-1H
for more detailed information.
BLIND SPOT #2: Elevated new construction activity. Although the
Q1 2013 increase in construction activity doesn’t indicate a supply-demand
imbalance, this metric needs to be monitored closely over the next 4–6
quarters. Six to eight quarters ago a similar uptick in multifamily constuc-
tion coincided with another “perfect game” (vacancy falling to 5%, double-
digit rental increases for eight consecutive quarters, record cap rate com-
pression, etc.), and today the market is anxious about overbuilding in light
of 200,000+ annualized permits.
BLIND SPOT #3: Cap rate compression. Industrial has been the last
commercial property type to experience cap rate compression since
2010, but it’s now catching up. The cap rates of 7%+ reported by RCA are
national averages, and do not reflect the sub-6% transaction activity for
portfolios or individual modern distribution buildings in key port and
inland distribution markets. Colliers is seeing rates in the 5% range for these
institutional warehouse properties. While cap rates can compress another
100–150 basis points from the national 7% average, the pace of this
compression should be monitored. Recall that at a cap rate below 8%, it only
takes a 200 basis point increase to wipe out 25% of a property’s value.
BLIND SPOT #4: Port and transportation worker strife. An ILA
strike was finally averted this past quarter and a six-year dock workers
contract agreed upon for the East and Gulf coast ports. It took a painful five
months (October 2012 to February 2013), during which retailers and
manufacturers re-routed or accelerated cargo shipments to beat changing
strike deadlines. Unfortunately, this process will repeat itself for the West
Coast ports at the end of 2013. And, other labor strike issues loom in
trucking and ports in LATAM, Asia and Europe. The 8-day Los Angeles
clerical workers strike last fall demonstrated how disruptive such
stoppages can be to the flow of goods, and many port tenants now have
operational clauses in their leases that provide for rent relief if cargo
cannot move through the ports. Know what’s in your leases.
BLIND SPOT #5: Due diligence risk. Sellers are now commanding
shorter and shorter periods of due diligence when selling properties,
owing to the scarcity of available assets, and the attention that industrial’s
perfect game has brought to the sector. This is one of the greatest new
risks to the industrial market. In Q1 Colliers saw due diligence periods
compress to 2–4 weeks for a number of warehouse transactions that either
were in growth-restricted MSAs or had investment-grade tenants. This
feeding frenzy for institutional-quality warehouse assets is shifting due
diligence risk from the seller to the buyer. Let the buyer be prepared: have
legal, inspection and environmental vendors ready to go at the drop of a
contract, positioned to close in as little as two weeks.
BLIND SPOT #6: Overlooking adaptive re-use opportunities. Not all
warehouse properties are created equal and not all markets can easily
develop new supply to relieve demand pressures. As a result, Colliers is
seeing functionally obsolete properties being acquired for adaptive re-use
in growth-restricted port markets. For example, older manufacturing
properties close to the market’s port facilities are being converted to
distribution space in cities such as Los Angeles, San Francisco, Seattle,
Miami, Charleston, and New York. Developers and investors shouldn’t
overlook these adaptive reuse opportunities in this feeding frenzy to
acquire assets.
In conclusion, we’re all rooting for industrial as it takes the mound for
a ninth inning in Q2 2013 with a perfect game on the line. But in our
excitement about higher ROIs and NOIs for our real estate assets, it’s
reasonable to remember there are still dangers out there. Keep your eye on
the ball, recognize the warehouse investment cycle we’ve entered, and
monitor the blind spots such as the ones we’ve discussed above.
10. P. 10 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY
MARKET
INVENTORY
MAR. 31, 2013
(SF)
NEW
CONSTRUCTION Q1 2013
(SF)
CURRENTLY
UNDER CONSTRUCTION
(SF)
NORTHEAST
Baltimore, MD 229,098,236 1,042,000 –
Boston, MA 152,776,556 – 1,200,031
Hartford, CT 96,802,106 – 510,000
Long Island, NY 162,706,462 30,000 379,564
New Jersey – Central 353,745,719 – 1,259,244
New Jersey – Northern 374,436,831 – 1,444,817
Philadelphia, PA 412,989,387 800,280 1,994,550
Pittsburgh, PA 180,812,833 127,120 100,302
Washington, DC 277,212,243 647,686 1,673,765
Northeast Total 2,240,580,373 2,647,086 8,562,273
SOUTH
Atlanta, GA 608,874,310 10,000 5,753,055
Birmingham, AL 101,989,079 – 412,000
Charleston, SC 32,653,481 327,000 166,000
Charlotte, NC 331,567,614 238,505 940,015
Columbia, SC 37,856,194 – –
Dallas-Ft. Worth, TX 718,440,660 390,641 3,124,220
Ft. Lauderdale-Broward, FL 123,462,807 351,614 247,376
Greenville/Spartanburg, SC 184,939,773 – –
Houston, TX 485,486,002 1,108,430 2,670,272
Jacksonville, FL 123,123,887 1,162,760 91,270
Little Rock, AR 45,009,027 18,376 497,443
Louisville, KY 176,471,087 15,000 –
Memphis, TN 220,677,114 869,892 1,745,000
Miami, FL 221,182,455 871,041 619,280
Nashville, TN 113,566,903 – 1,128,500
Orlando, FL 145,323,950 – –
Raleigh, NC 118,406,504 – 20,850
Richmond, VA 113,233,363 146,572 311,730
Savannah, GA 44,621,300 200,000 681,000
Tampa Bay, FL 212,868,243 35,519 152,500
West Palm Beach, FL 60,048,254 – 20,900
South Total 4,219,802,007 5,745,350 18,581,411
11. HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 11
UNITED STATES | INDUSTRIAL SURVEY
MARKET
INVENTORY
MAR. 31, 2013
(SF)
NEW
CONSTRUCTION Q1 2013
(SF)
CURRENTLY
UNDER CONSTRUCTION
(SF)
MIDWEST
Chicago, IL 1,310,969,792 1,586,541 4,738,635
Cincinnati, OH 244,257,287 697,938 –
Cleveland, OH 512,363,265 – 39,685
Columbus, OH 212,366,316 90,800 1,233,303
Detroit, MI 552,701,937 116,746 –
Grand Rapids, MI 112,282,721 – 285,000
Indianapolis, IN 281,007,396 2,060,027 820,640
Kansas City, MO-KS 235,738,568 642,377 2,117,425
Milwaukee, WI 223,736,866 330,575 90,000
Minneapolis/St. Paul, MN 247,588,469 669,000 871,000
Omaha, NE 67,721,789 – 35,636
St. Louis, MO 271,993,154 642,500 958,268
Midwest Total 4,272,727,560 6,836,504 11,189,592
WEST
Albuquerque, NM 36,902,890 – 242,500
Bakersfield, CA 33,426,098 21,400 2,243,673
Boise, ID 35,307,608 297,067 –
Denver, CO 215,963,643 – 855,271
Fairfield, CA 46,880,086 48,133 –
Fresno, CA 48,600,000 – –
Honolulu, HI 40,071,033 – –
Las Vegas, NV 109,306,668 129,000 619,320
Los Angeles, CA 887,796,700 – 3,031,000
Los Angeles – Inland Empire, CA 421,172,500 1,528,300 4,674,600
Oakland, CA 141,540,885 – 1,092,215
Orange County, CA 182,738,900 – 183,200
Phoenix, AZ 273,317,438 445,992 5,226,079
Pleasanton/Tri-Valley, CA 16,425,448 – –
Portland, OR 202,569,690 179,000 1,884,623
Reno, NV 88,034,379 – –
Sacramento, CA 189,042,368 70,000 –
San Diego, CA 187,148,659 49,256 123,429
San Francisco Peninsula, CA 40,898,873 – 54,000
San Jose/Silicon Valley, CA 251,655,806 – 181,100
Seattle/Puget Sound, WA 261,779,846 – 2,000,000
Stockton/San Joaquin County, CA 94,105,012 56,000 1,017,353
Walnut Creek, CA 17,760,034 – –
West Total 3,822,444,564 2,824,148 23,428,363
U.S. TOTALS 14,555,554,504 18,053,088 61,761,639
(continued)
12. P. 12 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY AS OF MARCH 2013
MARKET
ABSORPTION
Q1 2013
(SF)
VACANCY RATE (%)
DEC. 31, 2012
VACANCY RATE (%)
MAR. 31, 2013
NORTHEAST
Baltimore, MD 1,510,126 10.13 9.88
Boston, MA 20,414 17.72 17.71
Hartford, CT (39,368) 9.19 8.72
Long Island, NY 388,313 5.69 5.44
New Jersey – Central 249,929 9.22 9.15
New Jersey – Northern (264,668) 8.35 8.42
Philadelphia, PA 1,361,398 9.83 9.68
Pittsburgh, PA 569,415 8.15 7.84
Washington, DC 438,156 10.50 10.56
Northeast Total 4,233,715 9.67 9.56
SOUTH
Atlanta, GA 3,041,675 13.16 12.66
Birmingham, AL (22,649) 10.24 9.70
Charleston, SC 43,341 10.76 11.52
Charlotte, NC 1,676,930 12.06 11.62
Columbia, SC 265,246 8.78 8.08
Dallas-Ft. Worth, TX 1,159,637 9.19 9.08
Ft. Lauderdale-Broward, FL 658,619 8.33 8.06
Greenville/Spartanburg, SC 384,297 9.27 9.06
Houston, TX 1,332,391 5.03 4.97
Jacksonville, FL 1,376,050 10.08 9.81
Little Rock, AR (234,132) 11.17 11.78
Louisville, KY (749,083) 8.37 8.79
Memphis, TN 1,679,807 12.60 12.18
Miami, FL 318,612 6.41 6.56
Nashville, TN (15,157) 9.25 9.26
Orlando, FL 844,148 10.27 9.69
Raleigh, NC 369,400 9.67 9.36
Richmond, VA 123,791 10.02 10.03
Savannah, GA 256,100 11.84 11.66
Tampa Bay, FL 602,718 9.36 9.19
West Palm Beach, FL 324,515 7.28 6.74
South Total 13,436,256 9.65 9.44
13. HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 13
UNITED STATES | INDUSTRIAL SURVEY | ABSORPTION AND VACANCY AS OF MARCH 2013
MARKET
ABSORPTION
Q1 2013
(SF)
VACANCY RATE (%)
DEC. 31, 2012
VACANCY RATE (%)
MAR. 31, 2013
MIDWEST
Chicago, IL 6,038,962 9.53 9.00
Cincinnati, OH 2,114,377 8.73 8.12
Cleveland, OH 1,904,625 8.73 8.35
Columbus, OH 213,265 7.78 7.75
Detroit, MI 2,308,652 11.35 10.94
Grand Rapids, MI 37,278 7.13 7.10
Indianapolis, IN 761,095 6.19 6.40
Kansas City, MO-KS 1,720,440 6.62 6.14
Milwaukee, WI 491,922 6.60 6.51
Minneapolis/St. Paul, MN 1,054,156 8.30 8.02
Omaha, NE 125,427 5.16 4.99
St. Louis, MO 687,818 8.42 8.17
Midwest Total 17,458,017 8.73 8.38
WEST
Albuquerque, NM 39,363 10.25 10.21
Bakersfield, CA (308,397) 2.80 3.79
Boise, ID 858,210 9.51 7.84
Denver, CO 265,628 7.45 7.28
Fairfield, CA 52,228 10.13 10.12
Fresno, CA 100,000 9.26 9.05
Honolulu, HI 43,107 3.67 3.56
Las Vegas, NV 688,349 15.32 14.79
Los Angeles, CA 2,282,700 4.18 3.91
Los Angeles – Inland Empire, CA 2,049,800 5.93 7.21
Oakland, CA 758,594 8.23 7.70
Orange County, CA 262,200 5.10 4.97
Phoenix, AZ 1,361,244 12.58 12.22
Pleasanton/Tri-Valley, CA (38,232) 9.45 9.70
Portland, OR (7,361) 6.74 6.84
Reno, NV (250,374) 10.86 11.14
Sacramento, CA 64,404 12.72 12.72
San Diego, CA 972,570 9.92 9.43
San Francisco Peninsula, CA 537,367 9.85 8.15
San Jose/Silicon Valley, CA 1,055,828 10.73 10.16
Seattle/Puget Sound, WA 1,026,634 5.82 5.65
Stockton/San Joaquin County, CA 387,356 13.19 12.58
Walnut Creek, CA 76,751 9.78 9.35
West Total 12,277,969 7.77 7.66
U.S. TOTALS 47,405,957 8.89 8.68
(continued)
14. P. 14 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF MARCH 2013
MARKET
SALES PRICE
(USD PSF)
CAP RATE
(%)
VACANCY
FORECAST
(3 MONTHS)
ABSORPTION
FORECAST
(3 MONTHS)
RENT FORECAST
(3 MONTHS)
NORTHEAST
Baltimore, MD 53.00 7.80
Boston, MA 68.00 –
Hartford, CT 38.00 8.50
Long Island, NY 69.14 7.88
New Jersey – Central 85.00 7.20
New Jersey – Northern 92.00 6.00 Close to zero
Philadelphia, PA 56.00 7.85
Pittsburgh, PA 50.00 7.75
Washington, DC 146.08 6.50
Northeast Average* 73.02 7.44 – – –
SOUTH
Atlanta, GA 35.60 8.20
Birmingham, AL – – Close to zero
Charleston, SC 46.00 7.50
Charlotte, NC – – – – –
Columbia, SC – –
Dallas-Ft. Worth, TX 55.00 7.20
Ft. Lauderdale-Broward, FL 80.00 10.00
Greenville/Spartanburg, SC – –
Houston, TX 59.00 6.50
Jacksonville, FL 30.00 8.00
Little Rock, AR 65.45 9.00 Close to zero
Memphis, TN – –
Miami, FL 77.00 7.15
Nashville, TN 79.00 8.00
Orlando, FL 50.00 7.50
Richmond, VA – –
Savannah, GA 34.00 8.50 Close to zero
Tampa Bay, FL 37.64 8.89
West Palm Beach, FL 45.00 –
South Average* 53.36 8.04 – – –
* Straight averages used.
15. HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 15
UNITED STATES | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF MARCH 2013
MARKET
SALES PRICE
(USD PSF)
CAP RATE
(%)
VACANCY
FORECAST
(3 MONTHS)
ABSORPTION
FORECAST
(3 MONTHS)
RENT FORECAST
(3 MONTHS)
MIDWEST
Chicago, IL 52.00 6.15
Cincinnati, OH 37.50 8.25
Cleveland, OH – – – – –
Columbus, OH 32.49 –
Detroit, MI 22.33 8.89
Grand Rapids, MI – –
Indianapolis, IN 40.00 7.20
Kansas City, MO-KS 30.00 –
Milwaukee, WI 50.00 9.00
Minneapolis/St. Paul, MN 31.22 –
Omaha, NE – –
St. Louis, MO – – – – –
Midwest Average* 36.94 7.90 – – –
WEST
Albuquerque, NM 83.00 8.00 Close to zero
Bakersfield, CA 38.00 10.00
Boise, ID – –
Denver, CO 53.00 8.00
Fairfield, CA 76.49 7.40
Fresno, CA 42.00 9.00
Honolulu, HI – –
Las Vegas, NV 51.98 –
Los Angeles, CA 93.00 6.50 Close to zero
Los Angeles – Inland Empire, CA 69.00 7.00
Oakland, CA 94.30 6.50
Orange County, CA 130.00 6.00
Phoenix, AZ 52.00 8.10
Pleasanton/Tri-Valley, CA – –
Portland, OR 70.00 6.50
Sacramento, CA 76.00 –
San Diego, CA 80.00 –
San Francisco Peninsula, CA 250.00 7.00
San Jose/Silicon Valley, CA 105.00 6.00
Stockton/San Joaquin County, CA – –
Walnut Creek, CA – – Close to zero
West Average* 85.24 7.38 – – –
U.S. AVERAGE* 65.44 7.67 – – –
(continued)
* Straight averages used.
16. P. 16 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
UNITED STATES | INDUSTRIAL SURVEY | QUOTED RENTS AS OF MARCH 2013
MARKET
WAREHOUSE/DISTRIBUTION
SPACE
(USD PSF)
BULK
SPACE
(USD PSF)
FLEX/SERVICE
SPACE
(USD PSF)
TECH/R&D
SPACE
(USD PSF)
NORTHEAST
Baltimore, MD 4.74 4.93 10.99 –
Boston, MA 6.01 5.32 6.46 11.30
Hartford, CT 4.36 5.70 6.50 6.50
Long Island, NY 8.92 9.13 14.49 –
New Jersey – Central 4.62 4.12 12.19 12.19
New Jersey – Northern 6.29 5.95 9.92 12.26
Philadelphia, PA 4.25 4.15 7.00 11.00
Pittsburgh, PA 4.84 4.83 9.70 11.47
Washington, DC 6.19 5.57 11.55 15.50
Northeast Average* 5.58 5.52 9.87 11.46
SOUTH
Atlanta, GA 3.22 2.92 7.07 10.00
Birmingham, AL 3.48 4.04 7.88 –
Charleston, SC 3.85 4.30 6.25 16.25
Charlotte, NC 3.33 3.24 8.70 –
Columbia, SC 3.58 3.13 7.13 –
Dallas-Ft. Worth, TX 3.20 2.70 6.95 8.45
Ft. Lauderdale-Broward, FL 6.30 5.88 9.31 7.95
Greenville/Spartanburg, SC 2.88 2.67 7.09 –
Houston, TX 5.45 4.43 7.21 8.21
Jacksonville, FL 3.79 3.50 8.52 –
Little Rock, AR 2.68 2.74 7.35 –
Louisville, KY 3.30 3.45 7.73 –
Memphis, TN 2.51 2.59 4.78 9.50
Miami, FL 7.80 7.31 9.80 12.00
Nashville, TN 3.02 8.42 8.60 7.50
Orlando, FL 4.39 4.21 8.24 8.56
Raleigh, NC 3.74 4.17 9.94 –
Richmond, VA 3.56 3.60 7.89 9.11
Savannah, GA 3.95 3.75 7.00 10.00
Tampa Bay, FL 4.66 3.85 7.50 5.51
West Palm Beach, FL 6.82 6.18 11.03 7.00
South Average* 4.07 4.15 7.90 9.23
* Straight averages used.
17. HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 17
UNITED STATES | INDUSTRIAL SURVEY | QUOTED RENTS AS OF MARCH 2013
MARKET
WAREHOUSE/DISTRIBUTION
SPACE
(USD PSF)
BULK
SPACE
(USD PSF)
FLEX/SERVICE
SPACE
(USD PSF)
TECH/R&D
SPACE
(USD PSF)
MIDWEST
Chicago, IL 3.85 3.48 7.31 –
Cincinnati, OH 3.11 2.73 6.22 6.22
Cleveland, OH 3.33 3.02 7.77 –
Columbus, OH 2.76 2.67 4.82 4.82
Detroit, MI 3.84 3.72 7.30 7.30
Grand Rapids, MI 3.16 3.09 4.38 4.38
Indianapolis, IN 4.47 3.25 6.69 –
Kansas City, MO-KS 4.28 3.58 8.92 7.34
Milwaukee, WI 4.28 4.08 5.13 –
Minneapolis/St. Paul, MN 4.48 – 6.25 6.92
Omaha, NE 4.88 3.47 5.85 4.04
St. Louis, MO 3.77 3.56 7.30 –
Midwest Average* 3.85 3.33 6.50 5.86
WEST
Albuquerque, NM 5.42 4.25 8.84 8.84
Bakersfield, CA 4.00 3.42 8.00 –
Boise, ID 5.21 4.29 3.79 6.00
Denver, CO 4.62 3.78 8.55 9.50
Fairfield, CA 5.45 5.57 8.32 8.42
Fresno, CA 3.60 3.36 4.80 5.50
Honolulu, HI 11.88 – – –
Las Vegas, NV 4.56 4.32 6.00 9.36
Los Angeles, CA 6.36 6.20 9.75 12.50
Los Angeles – Inland Empire, CA 4.62 4.20 7.02 7.95
Oakland, CA 4.68 4.58 6.00 8.40
Orange County, CA 6.96 6.24 12.65 13.50
Phoenix, AZ 5.19 4.35 10.71 10.63
Pleasanton/Tri-Valley, CA 5.16 4.56 – –
Portland, OR 5.59 5.24 9.39 10.24
Reno, NV 3.72 3.14 7.67 –
Sacramento, CA 3.84 3.60 8.52 8.04
San Diego, CA 8.28 7.68 10.68 14.40
San Francisco Peninsula, CA 9.72 9.72 23.28 23.28
San Jose – Silicon Valley, CA 6.42 5.91 9.14 15.65
Seattle/Puget Sound, WA 5.86 4.87 13.18 –
Stockton/San Joaquin County, CA 3.96 3.66 – 8.40
Walnut Creek, CA 2.76 3.36 – 13.56
West Average* 5.56 4.83 9.28 10.79
U.S. AVERAGE* 4.77 4.44 8.34 9.68
(continued)
* Straight averages used.
18. P. 18 | COLLIERS INTERNATIONAL
HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
CANADA | INDUSTRIAL SURVEY
MARKET
INVENTORY
MAR. 31, 2013
(SF)
NEW CONSTRUCTION
Q1 2013
(SF)
CURRENTLY
UNDER CONSTRUCTION
(SF)
Calgary, AB 125,749,475 522,350 3,100,443
Edmonton, AB 79,421,803 200,150 1,596,770
Halifax, NS 7,604,256 7,625 135,000
Montréal, QC 348,025,640 30,000 232,740
Ottawa, ON 28,134,055 64,000 47,500
Regina, SK 16,928,786 40,000 270,000
Saskatoon, SK 21,084,000 244,000 219,000
Toronto, ON 762,336,331 70,000 6,256,003
Vancouver, BC 183,061,078 673,051 1,632,575
Victoria, BC* 8,908,924 25,000 –
Waterloo Region, ON 60,330,421 4,800 103,794
Winnipeg, MB* 79,692,082 – 245,435
CANADA TOTAL 1,721,276,851 1,880,976 13,839,260
CANADA | INDUSTRIAL SURVEY
MARKET
ABSORPTION
Q1 2013
(SF)
VACANCY RATE
DEC. 31, 2012
VACANCY RATE
MAR. 31, 2013
Calgary, AB 1,058,264 5.05 4.72
Edmonton, AB 197,525 3.35 3.34
Halifax, NS – 9.65 9.65
Montréal, QC (515,943) 4.34 4.50
Ottawa, ON 133,127 5.76 5.50
Regina, SK 123,000 3.51 2.96
Saskatoon, SK 83,000 4.94 5.50
Toronto, ON 1,326,442 4.13 3.89
Vancouver, BC 1,007,205 3.68 3.50
Victoria, BC* 17,000 4.15 4.23
Waterloo Region, ON (315,880) 6.80 6.66
Winnipeg, MB* – 2.97 2.97
CANADA TOTAL 3,113,740 4.25 4.13
* Data for Victoria and Winnipeg is from Q4 2012.
* Data for Victoria and Winnipeg is from Q4 2012.
19. HIGHLIGHTS | Q1 2013 | INDUSTRIAL | NORTH AMERICA
COLLIERS INTERNATIONAL | P. 19
* Data for Victoria and Winnipeg is from Q4 2012.
** Straight averages used.
CANADA | INDUSTRIAL SURVEY | SALES PRICE AND CAP RATE AS OF MARCH 2013
MARKET
SALES PRICE
(CAD PSF)
CAP RATE
(%)
VACANCY FORECAST
(3 MONTHS)
ABSORPTION FORECAST
(3 MONTHS)
RENT FORECAST
(3 MONTHS)
Calgary, AB 170.00 6.50
Edmonton, AB 125.00 6.72
Halifax, NS – 7.25
Montréal, QC 68.00 7.25
Ottawa, ON 110.00 7.50 Close to zero
Regina, SK 130.00 7.30
Saskatoon, SK 150.00 7.15
Toronto, ON 90.00 7.30
Vancouver, BC 187.00 6.00
Victoria, BC* 170.00 7.00 Close to zero
Waterloo Region, ON 66.00 7.10
Winnipeg, MB* 71.00 8.25 Close to zero
CANADA AVERAGE** 121.55 7.11
CANADA | INDUSTRIAL SURVEY | QUOTED RENTS AS OF MARCH 2013
MARKET
WAREHOUSE/DISTRIBUTION
SPACE
(CAD PSF)
BULK
SPACE
(CAD PSF)
FLEX/SERVICE
SPACE
(CAD PSF)
TECH/R&D
SPACE
(CAD PSF)
Calgary, AB 8.50 7.50 12.00 12.00
Edmonton, AB 8.00 7.50 10.00 12.00
Halifax, NS 7.75 6.75 10.50 15.00
Montréal, QC 4.75 4.25 6.00 8.00
Ottawa, ON 8.25 7.50 8.50 11.00
Regina, SK 10.00 9.00 12.00 14.00
Saskatoon, SK 10.00 9.00 12.00 14.00
Toronto, ON 4.86 – – –
Vancouver, BC 7.25 7.00 9.25 14.00
Victoria, BC* 12.00 10.00 13.50 13.50
Waterloo Region, ON 4.02 3.40 7.84 7.84
Winnipeg, MB* 6.00 5.25 9.95 12.75
CANADA AVERAGE** 7.62 7.01 10.14 12.19
* Data for Victoria and Winnipeg is from Q4 2012.
** Straight averages used.