Exports Help, but Industrial Sector Stays Sluggish

U.S. industrial markets stayed sluggish during the second quarter, according to the latest SIOR Commercial Real Estate Index, compiled by the Society of Industrial and Office Realtors in conjunction with the National Association of Realtors. Accordingly, their index measuring industrial performance tallied 68.5 points, more than 53 points lower than the index’s highest score—netted in the first quarter of 2006. A score of 100 points represents a balanced marketplace.Prospects for the next several quarters remain dim. While the weakened dollar has bolstered exports, the National Association of Realtors is predicting in its latest Commercial Real Estate Outlook that the sector’s vacancy rate will increase from 9.9 percent in the second quarter of this year to 10.8 percent in the second quarter of next year. Annual rent growth will dip slightly, from 1.1 percent this year to 1 percent in 2009. Net absorption will come in at negative 16.7 million square feet this year, largely due to negative absorption in the first half of the year. With positive absorption likely again in the second half of this year, next year is expected to turn in a positive 35.3 million square feet of net absorption. That is good news in a tough economy, although it represents a substantial drop from 2007’s total of 120.3 million square feet.