TAG Industrial Watch: April 20, 2024
When TAG predicted that industrial real estate could fall into recession in our July 2023 issues of the Industrial Watch magazine, most analysts were still optimistic about the state of the market. Unfortunately, the first look at Q1 market fundamentals and sales activity continues to support our claim. The 12 million square feet of net absorption among the top 50 metros (minimum 10,000 SF) represented the weakest demand for industrial space since Q2 2010. With net deliveries outpacing net absorption by nearly 91 million square feet, the national vacancy rate jumped 50 basis points on the quarter to 6.2%, reaching the highest level since Q4 2014. As we have pointed out since the beginning of last year, big-box accounts for the highest level of vacancies at 8.0%, compared to small industrial’s 3.9%. As to be expected, rising availability slowed down annual rent growth to pre-pandemic levels of 5.7% (CoStar).
With regard to sales activity, the roughly 1,700 transactions matched the lows seen in Q1 2011 as sale prices rose to about 10% on the quarter to an estimated average of $132/SF. Despite the economic environment, sellers continue to demand higher prices, often keeping cap rates below borrowing costs at just 6.7% – resulting in negative leverage (CoStar, GlobeSt.com). As long as seller expectations remain high, they run the risk of their listing going stale. On the other hand, if sellers are willing to meet buyers halfway, they can still take advantage of historic equity levels.
I N D U S T R I A L N E W S
Industrial Sale Prices Up 9.6% Over Previous Quarter
GlobeSt.com – April 1, 2024
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A ‘Beautiful Ugly Duckling,’ IOS Market Rolls
On Despite Broader Industrial Slowing
Bisnow – March 25, 2024
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Today, Equipment. Tomorrow, Whole Facilities:
Hydrogen Could Fuel A New Industrial CRE Revolution
Bisnow – April 2, 2024
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What 99 Cents Only’s Demise Means For CRE
Commercial Property Executive – April 8, 2024
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Blackstone’s Property Fund Reports
Its First Annual Shortfall Ever
TheRealDeal – April 3, 2024
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R E G I O N A L N E W S
Constructing Success: Insights
Into Chicago’s Industrial Market
REjournals – April 2, 2024
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99 Cents Only Stores Will Close
All Locations, Liquidate Inventory
Bisnow – April 8, 2024
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AEW Capital Sells Dallas Industrial Portfolio
Commercial Property Executive – April 9, 2024
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Construction On Grainger’s Massive New Houston-
Area Distribution Center To Start In June
CoStar – April 1, 2024
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Saia Starts Opening New Terminals
Freight Waves – April 8, 2024
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