The industrial market forecast May 2009 by NAR/TWR predicts that US industrial rents, which registered a minor decline of 0.8% in 2008, will continue at a considerably faster pace on the downward path in 2009 and 2010. In particular, NAR/TWR predict that US industrial rents will decline by 3.4% in 2009 and 4.0% in 2010.
The industrial rent declines will be triggered by a rising vacancy rate, which is expected to climb to 11.9% in 2009, representing an increase of 1.5 percentage points over the 2008 industrial vacancy rate, which stood at 10.4%. The US industrial vacancy rate is expected to continue rising at a slower rate in 2010 reaching 12.6%, which represents an increase of 0.7% over the predicted 2009 level.
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Following the trends in 2008, the increase in the US industrial vacancy rate in 2009 will be driven by the combination of negative absorption and rising supply. In particular, 51 million square feet of industrial space are expected to be vacated in 2009 at a time that supply is expected to increase by 66.6 million square feet. If there is a positive sign to be highlighted from the NAR/TWR forecast is the small but positive absorption of 23.2 million square feet predicted for 2010. Despite the positive absorption the vacancy rate is expected to increase as new completions of industrial space estimated at 102.9 million square feet will far outpace absorption.
The NAR/TWR retail industrial market forecast May 2009 certainly does not present a healthy picture for the US industrial market in 2010, which, as indicated, will be marked by a historically high vacancy rate of 12.6% and dropping rents. However, it should be noted that industrial market behavior varies widely across local markets and, within this context, many local industrial markets are likely to deviate significantly from average national performance. Thus, the national industrial outlook presented by NAR/TWR is not applicable to any particular locality. Investors need to evaluate carefully the prospects of the market, as they pertain to the particular locality and type of industrial property considered.
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Return from Industrial Market Forecast May 2009 to Market Watch
