Industrial real estate activity in the second quarter indicates tough market conditions, according to JLL.

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The industrial real estate market saw another strong batch of data for the second quarter, according to data released this week by Los Angeles-based industrial real estate firm JLL.

JLL has highlighted various highlights in its 2021 Q2 2021 Industrial Development Outlook, including:

  • the quarterly vacancy rate is one of the lowest average quarterly indicators – 4.8%;
  • quarterly rents are among the highest on record at $ 6.62 per square foot and annual rents are up 5.1%, with JLL expects industrial rents to continue to rise from 4% to 7% %;
  • logistics and distribution represented the leading industry in this quarter, accounting for 60.7 million square feet of leases in the second quarter and 24.9% of total leases in the first half of 2021.

In the report, Mehtab Randhava, JLL’s director of US industrial research, wrote that the combination of leasing and construction this quarter helped to spur industrial property growth as market access was severely limited due to record low vacancies and the emergence of new markets. high rent. What’s more, she added that as steel shortages and price fluctuations continued, this had minimal impact on the construction pipeline, which had 69 million square feet leased in the second quarter.

“Buildings do not remain empty for long as competition in the industrial market intensifies, and the number of vacancies continues to decline as the available supply decreases,” Randhava said. “As a result, tenants may find that they have to sacrifice specific needs when looking for a place, be it building features or location. Industrial leases in the second quarter of 2021 appear to have favored landlords, giving them the ability to work with tenants on leases and contracts. Average lease terms have remained unchanged for tenants (68 months), in part due to significant rent increases in the markets over the past decade and the location trade-off that some tenants are forced to make in the short term due to limited available accommodation options. shop.”

The impact of supply chain and logistics operations was predominant in the report, with JLL noted that as port downtime decreased, track times began to increase and lack of container storage space was a bottleneck. And the company added that now, more than ever, urban logistics is at the forefront, and the need for third-party logistics companies to manage the distribution, warehousing and delivery of goods has become necessary in order to keep up with consumers’ buying habits.

“Rapid changes in consumer buying habits continue to put pressure on the global supply chain and dramatically increase the volume of goods imported into the United States,” said Randhava and Kelsey Rogers, JLL’s senior analyst for industrial research in the Americas. “As a result, the demand for container storage facilities continues to grow. In addition, existing zoning barriers and limited capacity could affect future demand for container storage space. It is very important for tenants to evaluate their current supply chains. Now it is even more important to see where the occupiers take and distribute their goods. Supply chain investment has grown steadily over the past decade. These disruptions (traffic congestion, weather disruptions, etc.) are exacerbating the need for a shift in the global supply chain and requiring tenants to keep inventory closer to prevent future disruptions. ”

With net takeovers ahead of supply – as more than 69 million square feet have been delivered – and 408.6 million square feet are currently under construction, JLL said the pipeline is showing no signs of slowing down, which could lead to potential supply shortages associated with ongoing growing demand for industrial products. In the second quarter, net absorption was close to an all-time high of 107 million square feet and nearly 200 million square feet since the start of the year and is tied to a 2020 high.

“In the short term, the industrial pipeline under construction is 408.6 million square feet, which will help meet most of the demand we see,” said Randhava and Rogers. “The long-term effects of an outstripping net takeover supply include limited supply for tenants as well as limited availability of land. As a result, this can increase competition on the leasing side and lead to a shortage of supply in the industrial market. “

about the author

Jeff Berman, Group News Editor Jeff Berman – Group News Editor Logistics management, Modern material handling, and Supply chain management overview… Jeff works and lives in Cape Elizabeth, Maine, where he handles every aspect of the supply chain, logistics, trucking and handling on a daily basis. Contact Jeff Berman



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