Masonry Magazine November 2007 Page. 62
News
need for warehouse and distribution space, particularly in ports and distribution hubs, the rebirth of the technology sector is fueling demand for flex space, with a marked increase in markets such as San Jose, Calif.; Portland, Ore.; Seattle and Phoenix.
Much of the new industrial supply has been on a build-to-suit basis, and building obsolescence remains a factor for distribution facilities. With tightening availability in many primary markets, users are starting to show greater interest in secondary markets.
Vacancy rates in the industrial sector are likely to average 9.6 percent in the fourth quarter and 9.4 percent by the end of 2008, compared with 9.4 percent in the fourth quarter of 2006. Annual rent growth will more than double to 3.9 percent by the end of this year, and is estimated at 3.7 percent in the fourth quarter of 2008, up from a 1.4 percent annual rise at the end of last year.
The areas with the lowest industrial vacancies include Los Angeles; Albuquerque, Tucson; Orange County, Calif.; Portland, Ore.; and San Francisco, all with vacancy rates of 5.4 percent or less.
Net absorption of industrial space in 58 markets tracked will probably total 125 million square feet in 2007 and 165.6 million next year, down from 202.8 million in 2006.
Industrial transaction volume in the first seven months of 2007 was $26.8 billion, up 13 percent from the same period in 2006. Private investors accounted for 36 percent of industrial purchases, followed by equity funds at 25 percent.
Multifamily Market
The apartment rental market-multifamily housing-anecdotally appears to be impacted by an influx of single-family homes being offered for rent, cutting into the demand for apartment rentals. In addition, condos are being converted into rental units, particularly in markets such as Washington, D.C., and several areas of Florida.
At the same time, potential first-time homebuyers are hesitant and staying in the rental market, supporting multifamily fundamentals until the lure of homeownership returns, the housing cycle changes and more buyers enter the housing market.
Multifamily vacancy rates are likely to average 5.9 percent in the fourth quarter, the same as the fourth quarter of 2006, and then ease to 5.6 percent by the end of next year. Average rent is expected increase 2.9 percent this year and 3.8 percent in 2008, after a 4.1 percent rise last year.
Multifamily net absorption will probably total 209,200 units in 59 tracked metro areas this year, down from 229,400 in 2006, but increase to 234,400 in 2008.
The areas with the lowest apartment vacancies include northern New Jersey; Salt Lake City; Philadelphia; Pittsburgh; Los Angeles, Minneapolis; and Nashville, Tenn., all with vacancy rates of 2.7 percent or less.
Multifamily transactions in the first seven months of this year totaled $46.3 billion, compared with $41.5 billion in the same period in 2006. Half of the purchases were by private investors, while condo converters accounted for only 3 percent of acquisitions.
Torto Wheaton Research and Real Capital Analytics provided metro data.
Smith Selected
President-Elect, CREW
Network
Jane Snoddy Smith, a partner with Fulbright & Jaworski, LLP, has been selected as the national president-elect of the Commercial Real Estate Women (CREW) Network, a professional organization committed to advancing the success of women in commercial real estate.
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