The industrial market should get more respect because, with little fanfare, it is recovering more quickly than either the office or retail markets, trailing only the apartment market. My colleague, Rene Circ, National Director of Industrial Research, points out in his latest “Industrial Insight” that the market is “potentially exceeding expectations” as rising absorption combines with record low construction to drive vacancy down and rents up. Rene believes that double-digit effective rent growth could be on the horizon in some markets as early as next year.
The April “Beige Book” report released this week by the Federal Reserve lays out the reasons for the market’s solid performance. The report states: “Manufacturing continued to lead [all other sectors], with virtually every District citing examples of steady improvement, often with reports of increased hiring… Business services, including freight-related activities, improved in most Districts.” In a separate release, the Fed reported this morning that industrial production rose 0.8 percent in March, its highest monthly gain this year, and 5.9 percent compared with March 2010.
What is driving the manufacturing and transportation sectors? Think exports aided by the weak dollar, strong business capital spending, recovering consumer spending, and the ongoing drive of shippers to wring savings from supply chain efficiencies. Rising fuel prices could spur more activity if shippers increase their reliance on rail, creating demand for more but smaller distribution centers.
Maybe industrial is on the path toward greater respect or at least higher pop-culture visibility thanks to UPS’s catchy TV commercial, “That’s Logistics,” sung to the tune of “That’s Amore.”
Have a great weekend.