The Trends: Vacancy Rate Chugs Upward

The U.S. warehouse market continued to struggle during the third quarter. The vacancy rate spiraled up 27 basis points to 8.7 percent, according to commentary by Colliers International executive vice president of market and economic research Russ Moore.Considerable declines in manufacturing output and reduced retail inventories have hurt the market’s leasing activity. Though exports have painted a silver lining, “this is sure to change with the increasing possibility of global recession and the expected decline in demand in products destined for ex-U.S. markets,” he noted.Meanwhile, the amount of new product that came online during the third quarter did so at a slower pace. Colliers slotted the amount of new supply during that period at 41.6 million square feet, a drop from 43.9 million square feet during the second quarter and 44.9 million square feet in the third quarter of 2007. These figures are somewhat higher that those in CB Richard Ellis Inc.’s November Americas MarketView report by director of research operations for the Americas Raymond Wong. According to that report, 32.1 million square feet of new supply hit the market during the third quarter, down from the 39.7 million square feet during the previous quarter.“With new orders diminishing and inventory levels rising, expect to see further fallout from this sector, especially if there is a global recession,” Wong wrote. “Rental rates for the most part have remained stable, particularly for new facilities. Sales prices will also moderate, but liquidity may increase in the form of sale-leasebacks if firms that own their own facilities need to raise their own capital to continue operating.