ST. LOUIS, April 30 /PRNewswire/ -- Demand for warehouse and flex space continued to retrench in the first quarter of 2010, but the manufacturing sector is expanding again, according to Cassidy Turley, a leading commercial real estate services provider in the U.S.
"The economic downturn has hit the industrial sector harder than any recession in recent history, rendering record levels of empty warehouse and flex space," said Kevin Thorpe, Chief Economist at Cassidy Turley. "Industrial employment is not recovering as quickly or as aggressively as office-using employment, so it is not surprising to see the industrial sector lag the other areas of the economy that are staging a swifter recovery."
According to the report, the U.S. industrial sector is on the cusp of creating jobs again. In the first quarter of 2010, the manufacturing sector created 11,000 new jobs compared to the previous quarter, while the wholesale trade and transportation and warehousing sectors cut 7,200 and 33,100 jobs, respectively.
"The Institute for Supply Management (ISM) Index has been moving in the right direction for 8 straight months, suggesting that industrial employment and demand for warehouse and flex space are nearing an inflection point and should begin to turn positive in the comings quarters," continued Thorpe.
Despite investment sales of industrial properties remaining anemic, demand is beginning to pick up in primary markets, which is causing cap rates to tighten. Investor confidence is on the rise, and the sector is anticipating that the bid-ask spread will narrow and sales activity will pick up moving forward.
The Northeast market demand for industrial space continued to weaken. Net absorption declined from -2.7 million square feet in the fourth quarter of 2009 to -4.1 million square feet in the first quarter of 2010.
The Western region saw absorption fall from -7.4 million square feet in the fourth quarter of 2009 to -10 million square feet in the first quarter of 2010.
The South saw demand weaken slightly. Net absorption in the first quarter of 2010 registered -9.8 million square feet compared to -8.8 million square feet in the fourth quarter of 2009.
The Midwest was the only region to record an improvement in demand. In the first quarter of 2010, net absorption registered -4.5 million square feet, up from -5.8 million square feet recorded in the fourth quarter of 2009.
Cassidy Turley points out that certain markets are bucking the trend, posting noticeable increases in sales activity. Markets leading the way include Northern VA, Baltimore, MD, Chicago, IL, and Phoenix, AZ. The factors driving demand in these markets include increases in export demand, government spending, and business inventory accumulation.
"Businesses are ramping up inventories again in anticipation of a revival in consumer spending, and the global recovery is giving a boost to manufacturing," stated Thorpe." These signals indicate that industrial absorption will turn positive by the second half of 2010, at which point, vacancy will begin to stabilize. That said, if past is prologue, the rent recovery still has a ways to go."
Cassidy Turley's 1st Quarter National Industrial Trends Report also features an up-to-date breakdown of Net Absorption, Office Vacancy Rates, Effective Rents and Inventory chart by region and city.
About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider in the U.S., with 420 million square feet of managed space in 58 locations and $13 billion in completed transactions for 2009. The firms comprising Cassidy Turley include Cassidy & Pinkard Colliers in Washington, DC, Colliers Turley Martin Tucker in the Midwest, Colliers ABR in New York City and Colliers Pinkard in Baltimore, Charlotte and Raleigh, along with the addition of BT Commercial and CPS in Northern California (formerly affiliated with NAI and CORFAC, respectively), BRE Commercial in Southern California and Phoenix (both formerly affiliated with Grubb & Ellis), Colliers Houston & Co. of New Jersey and Colliers Barry of Wisconsin. Outside of North America, Cassidy Turley partners with GVA Grimley, the founder and majority shareholder of GVA Worldwide. GVA Worldwide is a global service company with over 2,500 real estate professionals operating in over 85 markets. Collectively, the Cassidy Turley firms have over 360 shareholders. Through its team of experienced service professionals, Cassidy Turley focuses on the needs of its clients, offering end-to-end services delivered across a full spectrum of commercial real estate including Capital Markets, Corporate Services (which supports more than 25,000 locations), Landlord and Tenant Representation and Property and Project Management. The firm also offers specialty services and industry focused practice groups as well as first class market research. In addition, Cassidy Turley is a leader in assisting clients to create more sustainable workplace environments. The firm recently ranked in the Top 10 on the Lipsey Co.'s Commercial Real Estate Top Brands Survey. Please visit www.cassidyturley.com for more information about the company.
SOURCE Cassidy Turley