Demand for Industrial Space Projected to Top 250 Million Sq. Ft. in 2014

NAIOP Report Says Warehouse, Manufacturing Absorption Will Flirt With Record Levels in 2014 as E-Commerce, Housing Construction Expand

The NAIOP study, authored by Drs. Hany Guirguis of Manhattan College and Joshua Harris of the University of Central Florida, projects that quarterly readings will fall between 60 and 65 million square feet of positive absorption through 2014.

Assuming GDP holds close to forecasts of above 3 percent growth in 2014, they expect industrial space to post approximately 250 million square feet of net absorption in 2015. More specifically, they forecast quarterly net absorption figures will range between 58 and 65 million square feet, with a mean forecast of 68.8 million square feet, for all of 2015. Also 2014 may actually produce a larger net absorption figure than 2015 due to pent-up demand for space left over from the recession which should normalize by 2015.

"Demand for all types of industrial space -- warehouse, fulfillment-distribution centers, manufacturing and flex -- is robust," noted Thomas J. Bisacquino, president/CEO of NAIOP. "An intense increase in e-commerce has steepened the demand for distribution and fulfillment centers, and companies are gobbling up space as a result."

Heightened demand big box space is already resulting in a burst of new speculative warehouse projects, with nearly 100 million square feet of new construction tracked by CoStar in the opening weeks of 2014.

Within the last week, KTR Capital Partners and Sponsor Properties acquire the 30-acre Pinole Point business park in Richmond, CA, from Sares-Regis. Pinole Point, a master-planned industrial park with a development site allowing for over 515,000 square feet of warehouse/distribution and manufacturing space, is fully entitled and ground-breaking is scheduled for this summer on three freestanding buildings ranging from about 40,000 square feet to 250,000 square feet.

"With the scarcity of Class A industrial product in this corridor, we plan to begin construction on a speculative basis," said Brian Gagne, senior vice president of Investments for KTR Capital Partners.

In the Greenville, SC, market, TDI-Southchase, a partnership led by principals from Atlanta-based TPA Group, plans to begin construction this spring on a new 250,000-square-foot spec building on 40 acres in Southchase Business Park in Fountain Inn.

As of early last month, CoStars PPR forecasting and analytics company was tracking 160 new leases of more than 100,000 square feet for a total of 35 million square feet across the U.S.

New housing starts were up 18% in 2013, and construction growth will likely continue as household formation rises and existing inventory is absorbed.

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Demand for Industrial Space Projected to Top 250 Million Sq. Ft. in 2014