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3Q Industrial Real Estate Said Strong

Net absorption of industrial space could increase slightly more than was forecast six months ago, and rise to 66,000 square feet per quarter for the second half of 2017, says NAIOP, the Commercial Real Estate Development Association.

The commercial real estate industry group also predicts the absorption figure will continue at roughly 60,000 square feet per quarter in 2018.

“Overall, market consensus seems to be that the latter half of 2017 may benefit from a release of pent-up demand,” the association says.

According to the model created by NAIOP, the potential for a slowdown in net absorption due to a stall in macroeconomic activity is now pushed into 2019 at the earliest.

However, this is open to further outward revision if the economy continues to grow at a pace above the current forecast, the association stresses.

“Given the uncertainty regarding policy changes in Washington, all forecasts for economic activity – and even industrial space demand – deserve a special caveat,” NAIOP explains.

“The debate about peak pricing in commercial real estate will only continue,” it adds. NAIOP also observes that space market fundamentals, especially in the industrial market, are only likely to improve as the overall economy expands.

Rising construction prices and labor shortages will likely moderate generation of new supply, even with rising economic growth, but will likely help rental rates and pricing continue to increase, the association says.

“It is increasingly clear that more physical goods will pass through multiple distribution warehouses before reaching consumers’ hands,” NAIOP adds.

“While the future of the economy and the effectiveness of the current U.S. President are likely to remain open for debate, there is little question that demand for industrial real estate will remain strong.”

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