Industrial demand remains solid, with 68.6 million sq. ft. of positive net absorption recorded in Q2 2015 — up 36% over the previous quarter and 20% year-over-year, according to the US Rent and Industrial Availability Report from CBRE.
Demand in the second quarter was broad-based, with strong growth in both core distribution markets and key secondary markets, and significant activity by e-commerce, food and beverage, and third-party logistics users.
With 41.2 million sq. ft. delivered during the quarter and another 87.8 million sq. ft. projected for the year, the development market has responded to strong user demand and rapidly shrinking supply.
Speculative development has become prevalent, representing the majority of new projects in most core markets.
Rents continued their steady march upward in the second quarter, growing by 1.3% in Q2 2015 and by nearly 3% year-to-date. An additional 3.2% of growth is forecast through the end of 2015, which would bring rents to within 4% of the previous cycle high.
After a sluggish first quarter, the key economic indicators of GDP growth and employment bounced back, with Q2 2015 GDP growth of 2.3% and an average of 221,000 jobs added per month in the second quarter.
U.S. industrial has become a favored asset class for large institutional investors, particularly foreign investors—as highlighted by the Q2 2015 entity level purchases of KTR (by a joint venture between Prologis and Norges) and IIT (by Global Logistics Properties).
These deals, which together total $11 billion, were funded in part or wholly by foreign capital.