Beyond the Health Crisis: National Industrial Outlook
Third Quarter 2020
Health Crisis Bolsters Industrial Outlook; Changing Behavior Accelerates Preexisting Trends
Sector’s outlook strengthened. The industrial market enters the second half of 2020 well positioned to record increased demand for available space and inflows of investor capital. Supported by a surge in online spending, renewed factory production and global trade improvements in May and June, the sector registered encouraging performance during the volatile second quarter. Nationwide, roughly 30 million square feet was absorbed during the three-month window, with more than 2,000 new leases executed involving spaces larger than 10,000 square feet. This activity, however, was outpaced by the delivery of more than 70 million square feet of space, equating to a 30-basis-point uptick in quarter-over-quarter vacancy. Still, the vacancy rate ended June 100 basis points below the 10-year average of 6.5 percent, backed by half the nation’s major metros recording a decline or nominal gain in second quarter vacancy. The combination of tenant demand for available space and tight conditions benefited average asking rents in most markets from April to June, pushing the national marketed rate to a record high. Asking rent growth may further elevate during the remainder of the year as preliminary leasing activity for the third quarter suggests industrial tenants are scooping up available square footage at a pre-pandemic pace.