The Expert: Pervasive Increases in Warehouse Availability Rate

Significant availability-rate increases are affecting a great number of U.S. markets—yet another side effect of the current economic recession in the United States. Manufacturing activity and industrial production declined substantially in the fourth quarter, and weak consumer spending continues to put downward pressure on demand for imports, further reducing the demand for warehousing and distribution space. The fourth quarter also marked a considerable drop in goods exports, which had been propping up demand for industrial space in many markets.The warehouse availability rate for CBRE Torto Wheaton Research’s Sum of Markets increased 70 basis points to 11.8 percent in the fourth quarter of 2008. This marks the fifth consecutive quarter of rising availability rates and a total increase of 210 basis points from the turning point in the third quarter of 2007. It is the largest increase in industrial availability since the fourth quarter of 2001. Although the national warehouse availability rate has not yet reached its previous peak of 12.1 percent, achieved at year-end 2003, it will likely do so in coming quarters, as the recession shows no signs of easing. The preliminary data shows availability rate increases to be widespread, with 49 of Torto Wheaton’s 64 markets showing increases over the previous quarter.Weakness in the warehouse sector is not limited to any particular geography or size of market. Markets exhibiting the largest availability increases during the fourth quarter include Austin (220 basis points), Cincinnati (160 basis points), Charlotte (150 basis points), Phoenix (150 basis points) and Atlanta (130 basis points). Among the larger industrial markets, Chicago’s warehouse availability rose 100 basis points to 14.7 percent, Los Angeles’ increased 30 basis points to 6.6 percent and Houston’s rose 40 basis points to 6.9 percent. Ten of the markets that Torto Wheaton tracked exhibited declining warehouse availability, including Pittsburgh, Indianapolis and Albuquerque.  Availability rates remain unchanged in Sacramento, Cleveland and Allentown, Pa.