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 Home -> Market Research -> Industrial Insight
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Industrial Insight
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2011 – One of the Strongest Years on Record?
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November 30, 2011
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Source: Grubb & Ellis Research
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With vacancy at mid-9 percent, availability about 300 basis points higher and rents 15 to 30 percent below their pre-recessionary peaks, it has gone mostly unnoticed that 2011 is shaping up to be the second best year in terms of supply/demand fundamentals on record. The metric in focus is the simple difference between how much space was absorbed (demand) less new space that was delivered (supply). This difference is likely to end up at around positive 90 million square feet in 2011. That is a significant improvement from the positive 14 million square feet in 2010 and the negative 200 million square feet in 2009, the worst year on record. This performance was exceeded only in 2005, at nearly 100 million square feet, when demand picked up significantly and new supply needed a year or two to catch up. Unfortunately, this time around, the strength actually comes from a weakness. It is the historically low new completions that drive this positive spread. If 2011 new construction came in at its historical average, the spread would be only about 25 million square feet. Fortunately, in terms of the market recovery, it is the spread that matters, not which side of the equation is driving it. And the positive spread is driving vacancies down about 90 basis points in 2011 and helping rents stabilize. However, it is also driving developers to their dusty drawing boards, which is why new completions will double in 2012. In the aggregate, there is enough strength in the economy to keep the spread positive in 2012, but 2011 will likely remain in second place.
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Need more information? Contact:
Rene Circ
National Director of Research, Industrial
312.224.3962
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