According to the “Third Quarter Industrial Outlook” recently released by Chicago-based industrial real estate business JLL, third quarter U.S.-based industrial real estate operation shone, with logistics-focused markets helping to lead the way.
The study noted that industrial leasing came in at 114 million square feet in the third quarter and was powered by logistics & delivery (14.3 million square feet), e-commerce, and 3PLs, as well as conventional retailers, construction materials & fixtures; manufacturing.
According to JLL, e-commerce operation, which has risen to record levels over the course of the current COVID-19 pandemic, owing to growing demand levels, accounted for more than 71.3 million square feet year-to-date and was led up by 45.1 million square feet from 2019. “Moreover, for the third quarter, the company said that e-commerce accounts for 13.4 percent of total leasing, and said that this could continue to remain intact in 2021, owing to increased last-mile delivery serving as a primary catalyst for high e-commerce demand coupled with a focus on last-mile logistics needs by tenants in the industry…[a] consumers appear to prefer online sh.
In the study, other primary data points outlined by JLL included:
In the third quarter, which established a new quarterly distribution milestone, 97 million square feet of new development was introduced to the industrial market, with Dallas-Fort Worth, New Jersey, Inland Empire, Eastern & Central Pennsylvania, Chicago and Houston comprising the top regions, which led to approximately 46.1 million square feet of new projects delivered;
For fresh supplies, speculative pre-leasing prices rose to 34.7 percent, jumping by 16.6 percent from Q2. At 67.6 percent, the volume of spec commodity under development tends to hold constant.
Complete net absorption is on target to meet the 200 million square foot milestone in 2020, an amount that has surpassed annually since 2014, with year-to-date absorption at about 165 million square feet (Dallas/Fort Worth, Chicago, Atlanta, Eastern & Central Pennsylvania, Inland Empire with a total of 77.6 million square feet were the markets with the highest net absorption rates);
At the end of the third quarter, the overall demand for rent for the U.S. manufacturing sector came in at $ 6.31 per square foot, with annual rent increases of 4.2 percent.
In the study, JLL stated that the future for industrial real estate remains bright and the sector continues to thrive and remain stable in the uncertainties concerning COVID-19. Moreover it added that e-commerce is anticipated to be what it considers a driving force for leasing volume heading into 2021 with working from home being more commonplace, combined with emerging stay at home orders. And it added that the Construction Materials & Building Fixtures field is also the case, with more individuals devoting resources to focusing on long-delayed construction ventures.
In an interview, Mehtab Randhawa, Director of Americas Industrial Science, JLL, clarified that the surge observed in the early stages of the pandemic over the past few months was not supposed to be as high as it has been.
“But since March, with all the physical location and the stay-at-home orders shutdowns, we have seen a steady spike in e-commerce for the third consecutive quarter, at 15.2 million square feet, being the number one sector now,” she added. And we also see more individuals focusing on home renovation-type ventures, which have also influenced the operation of construction and building fixtures. The estimates for the third quarter illustrated this across a good range of industries across diverse industries.
From an absorption viewpoint, Randhawa said that the industry is on target to reach or surpass the 200 million mark in 2020 with the current pace, through the third quarter, at 165 million square feet.
“We feel pretty good heading into 2021, looking at the fundamentals and the way things have performed,” she said.