CPN - March 2009 - (Page 8) INDUSTRIAL MARKET INTELLIGENCE Close Ties Warehouse Market Awaits Bounce from Retail By Paul Rosta he jury is still out on the industrial real estate sector’s most pressing issue: Just how much will the $787 billion federal stimulus package aid the market for warehouse and distribution facilities? At first glance, the program offers little that could directly reverse the contracting demand for space, noted Voit Commercial Brokerage executive vice president Michael Hefner. “The government is the consumer of last resort,” he noted. It does seem possible, however, that the stimulus package could increase demand in several ways.State and local spending on transportation and infrastructure programs is intended to jolt the construction industry, and an increased need for construction materials could boost the demand for distribution space. Also at issue is whether government aid will prove enough for the three major domestic auto manufacturers to T stave off a collapse that would deal a devastating blow to distribution and manufacturing, as well as to the economy at large. The current crisis has also underscored the links between retail and distribution facilities. The stimulus’ success in boosting demand for distribution facilities depends largely on whether the package can provide a substantial assist to the retail sector. “We’ve been used to a relatively robust retail economy for a long time,” noted Colliers International executive vice president & director of market and economic research Ross Moore. Consumer spending accounts for 70 percent of the nation’s gross national product, and that lengthy retail boom also prompted explosive mid-decade growth of distribution facilities. Thus, while a bump in consumer confidence would boost the retail economy, it would also renew demand for leasing, investment sales and development of industrial space. Though retail sales registered a surprising 1 percent increase in January, retailers are awaiting stronger signs before increasing shipments and expanding demand for distribution space.“The tenant has to believe there will be a pickup in demand for their products,” noted Alan Pontius, senior vice president & managing director for Marcus & Millichap Real Estate Investment Services Inc.’s industrial and office group.“The system right now is feeling very dependent on government intervention.” TIES THAT BIND But even a massive flow of dollars into the economy will not cushion the impact of the slowing retail sector on the nation’s ports and on the Shrinking Pains NORTHEAST Hartford 10.3 9.4 (percent vacancy in major U.S. warehouse markets) Tightening Up Central New Northern New NORTHEAST Jersey 8.1 9.3 6.1 Jersey 6.4 Growing Gap SOUTHEAST Little SOUTHEAST Rock, Ark. 16.7 12.9 14.6 Memphis 11.9 Louisville 8.6 7.2 Columbia, S.C. 6.82.4 Orlando 6.4 10.1 Raleigh, N.C. 16.2 19.2 Jacksonville, Fla. Fort LauderdaleBroward, Fla. 5.5 8.3 5.1 7.7 . 6.8 Charleston, S.C 9.1 Miami 5.6 7.8 6.4 11.6 8.7 13.3 8.9 13.3 2.9 6.7 2.9 6.2 4.6 6.4 8.9 10.6 Tampa 5.7 7.8 West Palm 7 Beach, Fla. 9 Nashville 5.4 7.1 Atlanta 11.5 Charlotte, N.C. Greenville, S.C. 12.6 7.5 8.2 9.7 9.9 MIDWEST 8.3 Cleveland 7.4 8.2 Indianapolis 7.4 Minneapolis 11 10.4 7.1 Kansas City 6.6 WEST 7.1 Portland, Ore. 6.7 6.3 Seattle 5.9 MID-ATLANTIC Baltimore 15.4 18.8 9.9 Washington, D.C. 11.7 Philadelphia 7.9 9 MIDWEST Boise, Idaho 5.9 8.7 8.6 Chicago 10.3 Cincinnati 6.5 8.1 6.6 Denver 8.2 Columbus 10.4 11.7 7.4 Milwaukee 7.9 SOUTHWEST Phoenix 10.3 15.4 Houston 4.4 6.1 8.8 Dallas-Fort Worth 9.8 WEST Las Vegas Inland Empire, Calif. Reno Bakersfield, Calif. Fresno, Calif. San Francisco Bay-San Mateo San JoseSilicon Valley Honolulu 3 4.4 Oakland, Calif. 6.7 8 Los Angeles 2.9 3.8 San Diego 8.3 9.1 Sacramento 10.4 10.8 Stockton-San County, Calif. Orange County, Calif. PleasantonWalnut Creek, Calif. 11.7 12.1 3.8 3.9 10 13.4 Q4 2007 Q4 2008 Source: Colliers International 8 COMMERCIAL PROPERTY NEWs • March 2009 • www.cpnonline.com http://www.cpnonline.com
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