DC’s Industrial Sector on Track

The Greater Washington, D.C., area has a solid industrial market that continues on an upward trajectory.
Washington D.C. Industrial Market

Washington, D.C. Industrial Market – Vacancy Rates, Asking Rents and Absorption – Q1 2015

The Greater Washington, D.C. area has a solid, 184 million-square-foot industrial market that continues to improve. According to a report from Avison Young, the region’s vacancy rate has reached 9.4 percent in the first quarter of 2015. This is a one percent decline from the first quarter of 2014, but the most significant change year-over-year since 2010.

Avison Young also reported that demand for industrial space in Greater Washington has been increasingly tied to e-commerce, similar to other areas. In the first quarter of the year, the region regiestered 25,000 square feet of negative net absorption, while in Q1 2014 it saw 818,000 square feet of positive absorption.

The region’s average asking rental rate has also improved, reaching $9.50 per square foot at the end of Q1, up from the $9.38 per square foot level posted in the previous year. Montgomery County and the District of Columbia have the largest asking rents, with $12.89 per square foot and $12.09 per square foot, respectively. The region’s smallest rents can be found in Prince George’s County, with $6.99 per square foot, and Frederick County, with $7.20 per square foot.

Companies looking to either lease space or buy industrial properties in the Washington, D.C. area are currently targeting modern, energy-efficient buildings, that allows them to have a better control over operating costs.  The region has seen some important transactions this year. At the end of January, Terreno Realty Corp. purchased six distribution buildings in Washington, D.C., for approximately $115.5 million. Recently, Atapco Properties Inc. paid $50.6 million for four industrial buildings at the Steeplechase 95 International Business Park in Capitol Heights.

According to Avison Young data, the market is healthy enough to support speculative construction, thanks to its large population, growing demand for new space, and strong transportation infrastructure. In the first quarter of the year, most construction activity occurred in Prince George’s County, Prince William County and Loudon County. In other areas, construction was constrained, as a result of rising land costs and limited availability.

 

Charts courtesy of Avison Young