Industrial ‘Souring’

The U.S. warehouse market weakened considerably during the first three months of 2008, posting only a modest rise in occupied space and a further increase in vacancy vs. a 2007 forth quarter, according to Colliers International’s latest report. Weak demand and rising completions pushed the first quarter vacancy rate up 23 basis points to 8.13 percent. New construction saw 46.1 million square feet completed during the period–down from the 55.5 million square feet from the previous quarter. Year-ago first quarter completions came in at 36.8 million square feet. Industrial developments int he pipeline also fell hard–thanks to a combinations of sluggish leasing and a bad financial market. New development dropped to 112.4 million square feet from 137.1 million square feet in the previous quarter and 138.3 million square feet a year ago. The report from Colliers researchers was that there is a “palpable level of negative sentiment in the warehouse leasing market at the present moment.” Though, they acknowledged that many markets are still posting “very strong fundamentals.” In terms of absorption, first quarter was 7.3 million square feet versus 26.3 million square feet in the prior quarter. A year ago absorption hit 27.3 million square feet. Finally, indicating a more bearish marketplace, 36 United States warehouse markets saw vacancies go up, while 15 saw them decrease.