The Commercial Market’s Hot Sector

The Commercial Market’s Hot Sector

The Commercial Market's Hot Sector.  Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net

The Commercial Market’s Hot Sector. Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net

In the U.S. commercial market, analysts are pointing to the sizzling warehouse sector as the industry to watch. Robust leasing for warehouses the last few quarters have prompted developers to scour the nation looking for new sites to accommodate the growth in warehouse demand.

The need is growing: Many markets have little or no available warehouse buildings that are 500,000 square feet or larger, CoStar Group reports.

Spec developers are increasing their purchases of industrial land. In the first three quarters of this year, developers have made at least $1.59 billion in land sales for proposed warehouse, industrial park, and light industrial projects. That exceeds the total industrial land sales from last year. It’s also the highest sales volume for industrial land since 2008, when it stood at $2.3 billion, according to CoStar Group national data.

Assuming planned projects aren’t delayed, the sector could reach a record-breaking level of construction in the final quarter of this year, according to Rene Circ, director of U.S. industrial research for CoStar Portfolio Strategy.

Currently, about 120 million square feet of industrial space is under construction in the U.S., with the most active markets centered in Dallas, southern California, Philadelphia, Chicago, northern New Jersey, and Houston, the CoStar Group reports.

“Overall, there is a lack of available supply across the U.S., supporting the growth of development pipelines and delivery of new product into the marketplace,” says David Toti, REIT analyst with Cantor Fitzgerald.

Source: “Spec Developers Scouring Markets for New Warehouse Sites,” CoStar Group (Oct. 15, 2014)