JLL Q2 2020 Industrial Outlook
JLL Q2 2020 Industrial Outlook
JLL Q2 2020 Industrial Outlook
Research
Industrial Outlook
U.S. Industrial leasing benefits from the
e-commerce surge
2 Industrial Outlook | United States | Q2 2020
Top
1.
4 industrial trends
2. 3. 4.
Given the health, policy, economic and financial disruption unfolding from the COVID-19 outbreak, resulting real estate
market shifts will not be fully reflected in Q2 2020 statistical indicators. It is too early to provide a quantitative assessment
or forecast of the ultimate market impact of COVID-19. Our analysis focuses on Q2 market activity and how the market is
positioned moving forward. We will be continually monitoring market movements as the situation evolves. Please feel
free to contact us if we can assist.
3 Industrial Outlook | United States | Q2 2020
What’s inside?
State of the market 4 Memphis 33
United States industrial statistics 6 Miami-Dade 34
Local markets Milwaukee 35
Atlanta 7 Minneapolis–St. Paul 36
Baltimore 8 Nashville 37
Boston 9 New Jersey 38
Broward 10 New York City 39
Central Valley 11 North Bay 40
Charleston 12 Orange County 41
Charlotte 13 Orlando 42
Chicago 14 Palm Beach 43
Cincinnati 15 Phoenix 44
Cleveland 16 Pittsburgh 45
Columbus 17 Polk County (FL) 46
Dallas–Fort Worth 18 Portland 47
Denver 19 Richmond 48
Detroit 20 Sacramento 49
East Bay 21 Salt Lake City 50
Eastern & Central Pennsylvania 22 San Diego 51
Greensboro/Winston-Salem 23 San Francisco Mid-Peninsula 52
Hampton Roads 24 Seattle-Puget Sound 53
Houston 25 Silicon Valley 54
Indianapolis 26 St. Louis 55
Inland Empire 27 Tampa Bay 56
Jacksonville 28 Washington, DC 57
Kansas City 29 West Michigan 68
Las Vegas 30 United States industrial rankings 60
Los Angeles 31 Contacts 62
Louisville 32
4 Industrial Outlook | United States | Q2 2020
Warehouse & distribution 10,071,101,908 6.3% 9.5% 89,265,852 138,843,343 268,662,445 $6.25
Manufacturing 3,471,514,938 3.2% 4.9% 684,983 7,505,623 12,011,747 $6.56
Special purpose 37,200,270 2.2% 3.3% -33,792 0 20,000 $8.48
Totals 13,579,817,116 5.5% 8.3% 89,917,043 146,348,966 280,694,192 $6.30
The U.S. Industrial market posted healthy figures in the second development pipeline remains strong and the impact this
quarter, despite a slowdown in global economic activity. The quarter was relatively modest. Prominent trends in the
logistics sector is benefiting from the huge increase in online industrial sector this quarter include delivery delays in
buying. Vacancy rates did tick up marginally after the initial speculative development projects, slowdown in preleasing
slowdown due to COVID-19; however, leasing velocity picked up rates due to a wait-and-see approach by tenants and a surge in
significantly in May and June. While stay-at-home orders slowed e-commerce leasing.
the pace of construction in select markets, the overall
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$1.00 2%
$0.00 0%
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U.S. industrial vacancy reported 5.5 percent at the close of the Overall net absorption was relatively steady this quarter,
second quarter. While we saw a slight increase of 30 bps from the reporting 42.1 million square feet, with Chicago leading the way
previous quarter, vacancy continues to remain near historic lows. in the industrial market, absorbing 7.0 million square feet. The
The JLL research team noted some firms hitting the pause Dallas/Fort Worth market had record-setting growth, with
button on signing leases as they waited to see what economic absorption levels hitting 6.5 million square feet this quarter, and
headwinds were ahead for their industry. continues to lead the nation in construction and deliveries going
into the second half of 2020. In select markets, absorption was
Despite uncertainty in the market, rent and concessions have muted, particularly among smaller tenants reliant on trade
remained flat at $6.30 per square foot quarter-over-quarter. through the Ports of Los Angles and Long Beach. The declined
Since 2019, rents have increased by 7.5 percent. With top port volumes in March strained global supply chains as they
logistics markets operating at sub–3.0 percent vacancy rates, we rushed to catch up. The slowing of the economy due to the
expect continued competition for quality space, adding pressure shelter-in-place orders took its toll on many small businesses,
on rents through 2020. forcing some to shutter space permanently, impacting overall
absorption in markets close to the major ports.
5 Industrial Outlook | United States | Q2 2020
E-commerce dominates leasing the shift in consumer behavior toward e-commerce is expected
Shelter-in-place has increased the use of online to continue. We anticipate increased interest for urban logistics
shopping and fueled demand from e-commerce users space in high-density markets such as Los Angeles, the San
Francisco Bay Area and New York going into the next year.
Retail
Retailer (e-commerce)
3PL
Building Fixtures
Industrial tenant sectors dominating the market this quarter
included e-commerce, logistics & distribution and 3PL. The sharp
pivot in consumer behavior and shopping habits due to the
pandemic resulted in e-commerce leasing more than 55.9 million
square feet of industrial space in the first half of 2020. With
physical retail severely disrupted over the past three months,
there has been a significant increase in shopping online. As a
result, the demand for infill space by large e-commerce and Source: JLL Research
logistic companies, driven in part by the change in shopping
habits and online purchasing due to the pandemic, cannot be The food & beverage sector accounted for 11.4 million square
understated. This quarter major e-commerce-dependent feet in leasing activity this quarter. The 5.2 million-square-foot
companies scrambled for Class A industrial product to manage increase was driven by significant adoption in online grocery
the increased demand on their supply chains. While the long- shopping, driving the need for cold storage space.
term effects of coronavirus shutdowns are yet to be realized,
The Construction pipeline remains strong, with deliveries in Q2 reaching 78.5 million square feet
Total new completions The industrial construction pipeline continues
100.0 80% to remain strong, despite delays as a result of
Preleasing rate
Q3 2017
Q4 2017
Q1 2018
Q2 2018
Q3 2018
Q4 2018
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
The industrial market has been remarkably resilient with ▼ Lowest vacancy
the increase in online shopping and e-commerce as
significant contributors, and we anticipate this trend to New York City 2.1%
continue. COVID-19 pushed online adoption rates New Jersey 2.5%
substantially higher than expected, driving continued Hampton Roads 2.9%
demand through the end of the year and into 2021. We are Orange County 3.1%
closely watching new construction, specifically pre-leasing Nashville 3.2%
rates of speculative construction.
Los Angeles 3.6%
Looking forward, the industrial property sector continues to
exhibit sturdy fundamentals. While there have been no ▲ Highest annual net absorption (s.f.)
meaningful impacts yet on lease rates due to COVID-19,
Dallas/Fort Worth 13,143,886
other core fundamentals including vacancy rates have the
potential to increase in the coming months, due to delays Chicago 11,333,467
in tenant occupancies. Increasing demand and limited Eastern & Central Pennsylvania 9,168,380
supply make the industrial property sector advantageous. Inland Empire 8,436,595
2020's total net-absorption to near the 200-million-square- Atlanta 4,985,009
foot-mark, as seen in previous years Indianapolis 4,685,805
We have seen an uptick in manufacturing inquiries from
▲ Highest under construction (s.f.)
healthcare, pharma and critical supply industries. This has
the potential to be a growing component of demand, Dallas/Fort Worth 22,691,724
especially in 2021. Urban logistics continues to grow in Eastern & Central Pennsylvania 21,047,107
importance as last mile delivery demand increases and the Inland Empire 19,774,200
infrastructure needs to be built to handle it. While the Atlanta 17,280,450
length and depth of the coronavirus-induced economic Chicago 16,375,590
contraction have yet to be determined, the industrial sector
is expected to be a resilient property sector moving into the New Jersey 14,316,905
second half of the year.
Atlanta
Outlook
Average asking rents ($ p.s.f.)
While COVID-19 may put further downward pressure on the economy, Q2 Direct
fundamentals and activities suggest continued demand for the metro looking $6 Sublease
forward. There are currently over 100 known tenants surveying the market, led
by retailers and logistics firms, and leasing activity continued to remain steady $4
in Q2 with the vast majority of deals new leases versus renewals. Leases
commencing in the second half of 2020 represent more than 5.1 million $2
square feet of space, which should help temper any negative pressure ahead.
$0
For more information, contact: Reg Williams | [email protected] 2006 2008 2010 2012 2014 2016 2018 2020
2.3 million square feet delivered in Q2, representing a 41% increase over the
10-quarter average of 1.3 million square feet. Of those deliveries, 1.7 million Total vacancy
square feet is concentrated in the I-95 North submarket with an availability 15%
rate of 65%. As a result, despite absorbing over half a million square feet 13%
through the first half of 2020, direct vacancy increased 110 basis points over 11%
the prior quarter. Looking ahead, 1.8 million square feet of industrial space 9%
remains under construction, 1.7 million of which is still on track to deliver by 7%
the end of 2020, with the majority located in I-95 North.
5%
2006 2008 2010 2012 2014 2016 2018 2020
Outlook
The global pandemic’s effect on the market remains in flux, as the length and
severity of its impact on the economy have yet to be determined. Average asking rent ($ p.s.f.)
Nonetheless, the market’s low vacancy rate, access to the Port of Baltimore, Direct
last-mile demand potential, and the production of e-commerce are extremely $8
Sublease
compelling, holding the market’s medium- to long-term prospects relatively
unchanged.
$6
$4
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Ben Caffey| [email protected]
5,000,000
Seven speculative buildings delivered vacant this quarter; a 419,608 square
feet on Aviation Drive from Panattoni and 77,976 square feet from Buzz Oates 0
on Bridgeford Street, both in Stockton, and five buildings at the Mountain 2016 2017 2018 2019 YTD
Technology Center in Tracy from Panattoni, totaling more than 513,000 2020
square feet. Eight speculative buildings are still under construction; one broke
ground this quarter on Arch Airport Road & Pock Lane, a 140,000 square-foot Total vacancy
project from Buzz Oates. Still, with the 9.4 million square feet of actively
15%
touring tenant demand, these projects will likely lease before year end.
10%
All of the new speculative construction delivering this quarter contributed to
the increase in vacancy from last quarter; up 60 basis points. This will likely 5%
continue through the year if the 2.5 million square feet of speculative new
construction in the pipeline delivers on time and is not preleased. 0%
2006 2008 2010 2012 2014 2016 2018 2020
Average asking rents were stable in the second quarter, and are still
historically high. A dip in rent is likely due to the increasing vacancy rate and
considerable amount of new speculative construction that has hit the market Average asking rent ($ p.s.f.)
in the past two years. Direct
$1
Outlook
The shelter-in-place has increased e-commerce demand and thus, demand $1
for industrial product. However, until restrictions are lifted, expect market
activity to be slower than recent history. Landlords will likely increase
concessions in the coming year, as the deliveries hit the market. $0
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Kristin Hagedorn | [email protected]
Port activity has also declined dramatically over the past quarter. The volume 0
of loaded cargo boxes fell by 17.2 percent in year-over-year comparisons as of 2016 2017 2018 2019 YTD
May. The slowdown comes from reduced global shipments resulting from 2020
supply chain disruptions and the global economic slowdown. Since March, 64
port calls have been cancelled, about 10.0 percent of the port’s regular
Total vacancy
volume. Additionally, both BMW’s and Volvo’s plants were shut down most of
April and May, leading to a drastic decline in automotive shipments leaving 15%
the port. The slowdown in volume casts doubts upon the ports $319.0 million
spending plan and the new Leatherman Terminal.
10%
Outlook
5%
The COVID-19 related downturn presents a continued level of uncertainty and 2006 2008 2010 2012 2014 2016 2018 2020
unease for all property sectors. However, industrial is the one sector with the
greatest upside. This is largely due to the surge in online shopping which has
increased space demand by e-commerce tenants. At the beginning of 2020, e- Average asking rent ($ p.s.f.)
commerce accounted for 11.8 percent of all retail spending. This share is Direct
Sublease
expected to rise to 18.0 percent by then end of 2020.
$5
COVID-19 exacerbated a trend that was already taking place in the retail
sector. As consumers spend more dollars online, that only increases the need
for industrial warehouses to serve those customers.
$0
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Brian Landes | [email protected]
After a frothy last few years, the industrial market in Charlotte is cooling. Supply and demand (s.f.) Net absorption
Leasing activity slowed by almost 70 percent amid concerns about economic Deliveries
disruption related to COVID-19. The second quarter saw firms hit the pause 10,000,000
button as they waited to see what economic headwinds were headed toward
their industry. Though there are signs of economic uncertainty, select
5,000,000
industrial sectors are primed for future growth. Logistics firms and e-
commerce real estate stand to benefit from potential permanent shifts in
consumer shopping behavior. 0
2016 2017 2018 2019 YTD
The second quarter continued the trend of tenants needing central locations 2020
or pushing toward the exurban fringe to find larger spaces for +500,000-
square-foot floorplates. Tenant demand was high in the Airport submarket, Total vacancy
fueled by requirements needing close proximity to the urban core. The
15%
Eastern Counties led net absorption with 373,317 square feet.
10%
Outlook
The COVID-19 related downturn presents a continued level of uncertainty and 5%
unease for all property sectors. However, industrial is the one sector with the
greatest upside. This is largely due to the surge in online shopping which has 0%
increased space demand by e-commerce tenants. At the beginning of 2020, e- 2006 2008 2010 2012 2014 2016 2018 2020
commerce accounted for 11.8 percent of all retail spending. This share is
expected to rise to 18.0 percent by then end of 2020.
Average asking rent ($ p.s.f.)
Direct
COVID-19 exacerbated a trend that was already taking place in the retail Sublease
sector. Closed physical stores and consumer fear have further driven $10
consumers to e-commerce platforms. As consumers spend more dollars
online, that only increases the need for industrial warehouses to serve those $5
customers. The profound shift in retail spending will be a boon for industrial
real estate long after COVID-19 has passed.
$0
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Brian Landes | [email protected]
The Chicagoland Industrial market posted healthy figures in the second Supply and demand (s.f.) Net absorption
quarter despite a major slowdown in global economic activity. The 7.1 million 30,000,000 Deliveries
square feet of positive net absorption outpaced first quarter’s figure. The
vacancy rate remained unchanged from the first quarter mark of 6.0 percent. 20,000,000
There are 9 submarkets where space availability remains especially tight as
evidenced by a sub five percent rate, better still, no submarkets have risen into 10,000,000
double digit vacancy. The “Amazon effect” was a major driver as the company
accounted for the four largest leases inked in quarter two. Those transactions -
spanned four submarkets within two states, encompassing 3.4 million square 2014 2015 2016 2017 2018 2019YTD 2020
feet. The automotive industry was also active as: Mazda, Hyundai, Brake Parts
Inc, American Tire Distributors and Camso USA completed leases this quarter.
The most notable investment sale was completed by Prologis, selling two Total Vacancy
buildings occupied by Amazon in Kenosha totaling 1.6 million square feet to 8.8%
7.8% 7.3%
Alpha Industrial Properties. Also of note, Brookfield Properties acquired a 7.1% 7.3%
6.1% 6.1% 6.0%
220,000 square-foot truck terminal in a sale leaseback with Go2 Logistics, in
River Grove. Coming out of the winter, the development pipeline remains
brisk with nearly 12 million square feet completed at mid-year. We witnessed
certain speculative and build-to-suit projects paused due to uncertainty,
however, there are massive build-to-suits moving forward by Harbor Freight, 2013 2014 2015 2016 2017 2018 2019 2020
Ferrara Pan and Amazon, keeping the construction figures elevated with 16.4
million square feet underway.
▶
• Local developers remain optimistic and continue to create new
opportunities in the area to alleviate historically low vacancy. Total availability 5.6% ▶
• Look for companies to re-shore critical operations, increase inventories, Sublease vacancy 1,699,321 s.f. ▶
and diversify supplier networks to reduce business risk. Average asking rent $4.01 p.s.f. ▶
Concessions Stable ▶
Cleveland’s industrial market performed well in the midst of heightened
COVID-19 uncertainty with healthy activity from companies like Amazon, Supply and demand (s.f.) Net absorption
Lordstown Motors, General Motors and more. During the second quarter, Deliveries
Amazon signed two new leases totaling more than 600,000 square feet. In 4,200,000
June, Lordstown Motors unveiled its electric truck prototype and secured
1,000 new sales bringing its presale number to 14,000 units. Production of the 2,800,000
truck is scheduled to start in the summer of 2021. Moreover, General Motors
1,400,000
purchased a new site in Lordstown for $5.1 million and has begun
construction of a $2.3 billion battery plant. Local companies were also active -
in the second quarter including GOJO, which is expanding into a 430,000- 2016 2017 2018 2019 YTD
square-foot building in Navarre and a 320,000-square-foot facility in Maple 2020
Heights. Lastly, Clinton Aluminum plans to construct a 240,000-square-foot
facility just southwest of Akron in Norton, Ohio. Total vacancy
With much uncertainty, the industrial sector has been able to adapt quickly 12%
and demonstrate resiliency. Many local companies continue to expand like
Infinium Wall Systems, a fast-growing company that is building a new 120,000- 9%
square-foot headquarters in Strongsville. Likewise, local developers continue
6%
to create new opportunities like Industrial Commercial Properties, who
recently acquired the mortgage to the long-troubled City View Center site with
3%
plans to create a mixed-use business park. Similarly, Premier Development 2006 2008 2010 2012 2014 2016 2018 2020
Partners purchased the old ABB site in Wickliffe for $1.6 million with plans to
reposition the property for future companies.
Outlook Average asking rent ($ p.s.f.)
Direct
The global pandemic’s effect on the industrial market continues to evolve, $5
Sublease
and the shifting market conditions have created both winners and losers. E-
commerce, food and beverage, and 3PLs are aggressively leasing large blocks $4
of space, which is sustaining market demand as well as exposing a shortage of
$3
modern bulk and freezer-cooler space. Despite the increase in demand for
premium space, construction activity is likely to cool through the end of the $2
year as developers adopt a cautious stance. 2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Johnathan Miller | [email protected]
Industrial Insight
Sublease vacancy increased by 30 basis points as more spaces are being put Total vacancy
on the market, offering an opportunity for occupiers. Although demand has
10%
diminished, this could be beneficial for the market as demand had
consistently outpaced supply for the previous years. With the market finding 8%
an equilibrium of sorts, rents are expected to remain flat. 6%
4%
Additionally, the development pipeline is at its lowest point since speculative 2%
development restarted in the East Bay in 2014. With only 1.37 million square 0%
feet under-construction and no new starts beginning in the second quarter, 2006 2008 2010 2012 2014 2016 2018 2020
the East Bay will see reduced new deliveries as the market recovers from the
impact of COVID-19.
Average asking rent ($ p.s.f.)
Direct
Outlook
Sublease
Although the market seems balanced for now, as the economy reopens and $1.00
demand picks up over the coming year, the East Bay could become space- $0.75
constrained, especially as developers halt speculative construction. As a $0.50
result, expect rent growth to pick up when demand returns and available
$0.25
options become more limited. Expect developers to seek more urban infill
and land opportunities to meet requirements as the market emerges. $0.00
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Joel Woodmass | [email protected]
After a surge in Q1, net absorption fell to 83,480 square feet across the Triad.
Despite the reduction in demand, occupancy remained steady and vacancy 0
fell from 4.2 percent to 3.9 percent. Rental rates, having reached a high water 2016 2017 2018 2019 YTD
mark in Q1, dropped by 12.0 percent to $3.72 per square foot. The Triad has 2020
had lower levels of construction compared to other peer markets in the
Carolinas which is contributing to sustained occupancy and rental rates. Total vacancy
15%
During the second quarter Pepsi Bottling moved into 316,000 square feet, a
win for Winston-Salem. Ryder Logistics moved into 120,000 square feet of new 10%
manufacturing space in Greensboro.
5%
Outlook
The surge in online shopping has increased space demand by e-commerce 0%
tenants. At the beginning of 2020, e-commerce accounted for 11.8 percent of 2006 2008 2010 2012 2014 2016 2018 2020
all retail spending. This share is expected to rise to 18.0 percent by then end of
2020. COVID-19 exacerbated a trend that was already taking place in the retail
sector. As consumers spend more dollars online, that only increases the need Average asking rent ($ p.s.f.)
Direct
for industrial warehouses to serve those customers.
Sublease
$10
The Triad can capitalize upon this trend based largely on its geographic
location. Sitting within a 90-minute drive between both Charlotte and Raleigh- $5
Durham, the region has enviable access to a consumer pool of over 6.6 million
people across the Piedmont.
$0
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Brian Landes | [email protected]
absorption, as did a net occupancy gain of about 157,000 square feet as World
1,500,000
Distribution Services moved from 6969 Tidewater Dr into 326,000 square feet
at 1537 Air Rail Ave, which was converted from manufacturing and “renovated- 0
to-suit” for the tenant after its purchase by Lingerfelt in December 2018.
Occupancy at prime buildings with 100,000 or more square feet has remained -1,500,000
stable, but a few spaces between 20,000 and 60,000 square feet have come on 2016 2017 2018 2019 YTD
the market and vacant sublease inventory rose by just over 70,000 square feet. 2020
to the outright - and ongoing - strength of the industrial market in Houston. 5,000,000
0
After an incredibly strong quarter of new deliveries in the first quarter when
2016 2017 2018 2019 Q2 2020
8.4 million square feet of industrial product came online, the second quarter
saw another robust period of growth with 6.4 million square feet of new Total vacancy
deliveries. Because of the infusion of these new properties into the inventory,
vacancy rose 110 basis points as just over 4 million square feet came online 8%
without a tenant to occupy the space. This phenomenon created a rare 6%
situation where both vacancy has increased while net absorption is positive.
4%
As we saw in the first quarter, the Coronavirus and economic uncertainty has 2%
slowed property tours and therefore transaction activity, a trend which will 2006 2008 2010 2012 2014 2016 2018 Q2
continue into 2021. With many large deals moving to a holding pattern, 2020
leasing activity diminished by a significant margin, with transactions over
250,000 square feet all but evaporating. Average asking rent ($ p.s.f.) Direct
$0.60 Sublease
Outlook $0.50
Given the ongoing expansion of port activities and retail/eCommerce in $0.40
Houston, the industrial market is well-positioned to weather the challenges
$0.30
facing the region. However, vacancy will continue to climb as the 13 million
$0.20
square feet of new development currently underway is finished. The most
2006 2008 2010 2012 2014 2016 2018 Q2
pressing question now is how quickly this new product is absorbed. 2020
Outlook 3%
Tenant activity has remained consistent amid the COVID-19 pandemic. Deals 0%
continue to get done and new requirements continue to roll in. Since 2006 2008 2010 2012 2014 2016 2018 2020
Indianapolis’ stay-at-home orders first took effect in late March, 40 new
requirements totaling 10.0 million square feet are being tracked as actively Average asking rent ($ p.s.f.)
seeking space. Additionally, 26 deals totaling 10.2 million square feet have Direct
$6
been moved from active to done. Sublease
$4
This demand speaks to the overall health and resiliency of the Indy industrial
market. With new active requirements in addition to future occupancies by $2
tenants that signed deals this quarter, the market is set up to continue
weathering the storm during the second half of 2020. $0
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Mike Cagna | [email protected]
Brianna Marshall | [email protected]
Absorption dipped into negative territory during the second quarter after a
-5,000,000
meager start to the year. Budget Office Interiors vacated 73,000 square feet at 2016 2017 2018 2019 YTD
3030 Powers Avenue, HCH Bearing America vacated 33,000 square feet on Port 2020
Industrial Drive and NCP Solutions vacated 30,000 square feet at 8948 Western
Way. On the positive side of absorption Snowbird Technologies took 37,600 Total vacancy
square feet and the Mayo Clinic took 10,000 square feet, both at 7787 Bayberry
Road. CrazyArt also took occupancy of a short-term 30,000 square foot space in 15%
1 Imeson Park Boulevard. Samsonite is set to take occupancy at 1 Imeson in
10%
November of 2020.
5%
Most of the slowdown in activity can be attributed to firms taking a wait-and-
see approach, rather than a true reversal in business activity. Jacksonville’s 0%
employment market is also less concentrated in hospitality and retail than the 2006 2008 2010 2012 2014 2016 2018 2020
rest of Florida and should rebound as the pandemic is contained.
Outlook
The global pandemic’s short term effects remain in flux, as the duration and Average asking rent ($ p.s.f.)
severity of its impact on the economy have yet to be determined. Based on $7 Direct
the latest available data, the economy is likely beginning to recover from the $6
Sublease
point of weakest demand, but it will take several months to verify the
$5
underlying market conditions. The recent announcement that the redesigned
$4
2021 Ford F-150 will be built in the Claycomo plant offers additional stability
to the region’s manufacturing sector. Industrial market indicators look to $3
remain stable through the remainder of the year. $2
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Claire Cason | [email protected]
▲
• New construction continues as developers become more creative with
Total vacancy 4.4%
▶
site selection.
• Tenant demand has remained with an increase in deals expected in the Sublease vacancy 635,808 s.f. ▲
second half of 2020. Average asking rent $3.84 p.s.f.
▲
Concessions Stable ▶
The Louisville industrial market has been relatively slow the first two quarters
of 2020, with vacancy rising back above 8.0 percent. This is due to some new Supply and demand (s.f.) Net absorption
Deliveries
construction coming online, as well as lease expirations in second and third 7,000,000
generation space. Despite the rising vacancy, demand remains strong with 5,000,000
several deals expected to close in the third quarter on properties sized across
3,000,000
the spectrum.
1,000,000
Construction activity remains steady with several buildings delivering this -1,000,000
quarter. Schroering delivered the fully leased 168,000-square-foot building on 2016 2017 2018 2019 YTD
Glengarry, and Gray Construction delivered the 256,000-square-foot building 2020
in River Ridge. Also, Clarion delivered the 659,790-square-foot Silver Creek
Logistics Center in Sellersburg. This building is in an area that has historically Total vacancy
not had modern bulk development, but is indicative of how landlords within 10%
Louisville are getting creative as the most obvious sites have already been 8%
developed.
6%
On the investment side, it has been a slow start to the year. However, there are 4%
several intriguing packages being marketed that have received interest from 2%
investors at cap rates similar to that of pre-COVID-19. 2006 2008 2010 2012 2014 2016 2018 2020
Outlook
Despite a slow start to the year, it is our expectation that there is some Average asking rent ($ p.s.f.) Direct
Sublease
momentum in the market that will translate into an increase in deal velocity $4
and potential investment sales. There remains significant interest from
developers looking to build in Louisville for the first time, as well as those with
$3
existing assets looking to expand their local portfolios.
$2
2006 2008 2010 2012 2014 2016 2018 2020
Tracked leasing activity in Q2 totaled 3.8 million square feet in new leases Total vacancy
signed over 10,000 square feet, suggesting that the positive absorption trend
will continue into Q3 and Q4 as these new leases commence. Renewal 12%
activity totaled 1.6 million square feet for the quarter, suggesting continued 10%
confidence in the market by existing tenants and reducing the likelihood of
8%
large move-outs offsetting the positive absorption expected from the high
volume of new leases. 6%
4%
Outlook 2006 2008 2010 2012 2014 2016 2018 2020
Memphis’s unique position as a North American distribution hub will likely
allow the market to weather the COVID-19 crisis with little disruptions. The
market will benefit from the accelerated change in consumer behaviors Average asking rent ($ p.s.f.)
towards eCommerce; the market’s central location with one-day truck access Direct
to much of the eastern, central, and midwestern US, positioning along the $4
Mississippi River, unrivaled freight train infrastructure, and access to FedEx’s
world hub will allow the market to adapt to and benefit from the increased
demand for distribution space.
$2
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Austin Shealy | [email protected]
▶
delivery in Oak Creek. Total vacancy 4.8% ▲
• The average industrial asking rate was largely unchanged through the Sublease vacancy 46,782 s.f. ▶
second quarter at $4.47 per square foot NNN.
Average asking rent $4.47 p.s.f. ▶
Concessions Stable ▶
Continued spec deliveries within the rapidly expanding Germantown area of
the Washington County submarket have in-part led to increased vacancy rates Supply and demand (s.f.) Net absorption
Deliveries
while the buildings await new occupants. Since 2018, Washington County has 3,000,000
gained nearly 2.0 million square feet of new supply (both spec and build-to- 2,000,000
suit), pushing the vacancy rate up to 3.9%, the highest of the suburban
industrial submarkets. 1,000,000
0
The largest second quarter spec delivery was 2 Goldendale Road (117,000
-1,000,000
square feet) in Germantown. Build-to-suits completed in the second quarter 2016 2017 2018 2019 YTD
include Illing Company’s 240,500-square-foot consolidation from just 2.5 2020
miles south in Germantown, and Dielectric’s 100,000-square-foot relocation
from Menomonee Falls. Awaiting final approval for occupancy is the 650,000- Total vacancy
square-foot Amazon facility in Oak Creek. (JLL is only considering footprint in 6%
total square foot number)
4%
Significant leases signed in the second quarter include Burton & Mayer (42,600
square feet) at N88W13901 Main St in Menomonee Falls; AllStates Trucking 2%
renewal (42,000 square feet) at 4659 W Basswood Dr in Franklin; and Douglas
0%
Dynamics (30,000 square feet) at 8301 W Parkland Ct in Milwaukee.
2016 2017 2018 2019 2020
In early April, Blackstone’s Link Industrial acquired CSM’s industrial portfolio for $665 -
million. Of the 7.0 million square feet that traded, 5.7 million square feet were in the
Twin Cities, making it the largest industrial transaction in Minnesota’s history. (5,000,000)
2016 2017 2018 2019 YTD
All speculative construction stopped at the onset of COVID-19 in March, yet build-to- 2020
suit development will continue in order to meet the continued demand. ”This
quarter, over 850,000 square feet of new supply delivered. French Lake Phase I Total vacancy
delivered fully leased by Spears Manufacturing, and Retail Tech occupied 200,000
10%
square feet in the first building at Holasek Business Park in Chanhassen. Currently,
at least six large users require new facilities north of 250,000 square feet. In this low- 8%
supply market, those needs will require BTS development. Net new demand for
modern bulk space totals 700,000 to 900,000 square feet of user needs. The market 6%
is waking up and tour activity has increased since mid-June, when market tours
went from a standstill to a few tours a week. Most ownership groups have begun 4%
receiving RFPs again. 2006 2008 2010 2012 2014 2016 2018 2020
Outlook
Average asking rent ($ p.s.f.)
Manufacturing and distribution users were deemed essential businesses by Direct
$8
Governor Walz’s executive order this spring, and until the recent phased reopening,
$7
industrial occupiers have been the few hubs of onsite job activity in the Twin Cities. $6
Industrial properties will continue to see user demand through the remainder of the $5
year, particularly among life sciences firms. The Twin Cities’ strengths in medical $4
device and pharmaceutical manufacturing promise continued market activity as the $3
search for COVID-19 treatments continues. $2
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Carolyn Bates | [email protected]
$2
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Austin Shealy | [email protected]
requirements across the state. This bodes well for developers and landlords of $8
Class A space. Smaller tenants may continue to be conservative given the
economic uncertainty nationwide. As a result, smaller, lower quality buildings $6
may experience more downtime while the economic landscape shakes out. $4
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Alex Kachris| [email protected]
The second quarter saw the delivery of Wildflower Development’s two new
96,900-square-foot Class A warehouses in the Flatlands/East New York 0%
submarket which are among the first of the new properties in the Brooklyn 2016 2017 2018 2019 2020
development pipeline to be completed.
Average asking rent ($ p.s.f.)
Outlook $27 Direct
The New York City industrial market which in particular is experiencing an ever $24
growing reliance on e-commerce and food and beverage delivery may be
$21
buoyed from some of the economic fallout driven by COVID-19. As a result, our
outlook on the market remains cautiously optimistic for both the short and $18
long term growth prospects. $15
2016 2017 2018 2019 2020
For more information, contact: Corey Milanaik | [email protected]
With moving activity hindered by the COVID-19 pandemic and ensuing shut- Total vacancy
downs, absorption was virtually flat this quarter at negative 21,710 square feet, 20%
bringing the year-to-date total down to 619,062 square feet. Lockheed Martin
vacated 63,000 square feet in Brevard and A-1 Moving ceased operations and 15%
vacated 74,000 square feet on President’s Drive. Several major move-ins helped 10%
curb negative absorption this quarter. Paradise Grills took nearly 120,000 square
feet at Distribution 429 in Apopka, Sherwood Bedding expanded into an 5%
additional 100,000 square feet at Air Commerce Park and Marine Fasteners moved 0%
into 56,000 square feet at the newly delivered Sanford Logistics Center. 2006 2008 2010 2012 2014 2016 2018 2020
Outlook
Exposure to the tourism industry has not yet had a significant impact on supply or Average asking rent ($ p.s.f.)
demand in the region, but may play a larger role later in the year. The extent of Direct
the impact will be dependent on the duration of shutdowns and occupancy $10
Sublease
limits, which could spell trouble for some firms in coming quarters. However,
absorption in the second half of 2020 is expected to be strong as major e-
commerce tenants take occupancy of spaces leased earlier in the year. Demand $5
for industrial real estate is projected to remain strong through the coming years
as more retail and grocery shopping moves online. This will be especially true for $0
central Florida, where these trends will be boosted by population growth. 2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Benjamin Landes| [email protected]
Deemed an essential job in Arizona, construction has remained consistent, Total vacancy
allowing for nearly 3.6 million square feet of new inventory to be added this 16%
quarter. An additional 4.1 million square feet of product is currently underway 14%
12%
with seven additional projects in the pipeline. Just over 3.4 million square feet 10%
of under construction comes from warehouse and distribution buildings while 8%
6%
another 700,000 square feet are attributed to manufacturing. The West Valley 4%
has just over 4.3 million square feet of product in the works and roughly 1.9 2%
million square feet in the Northwest submarket alone. 0%
2006 2008 2010 2012 2014 2016 2018 2020
Outlook
Phoenix continues to see an economy led by the healthcare, technology and
Average asking rent ($ p.s.f.)
finance industries. Vacant land remains readily available for development in Direct
the West and Southeast Valley as well as smaller submarkets that have Sublease
industrial land ready for infill opportunities. The market still offers a lower cost $1.00
of living and a young talent pool for employment opportunities. Although
Phoenix is not immune to the current economic climate created by COVID-19, $0.50
some large scale users are seeing an increase in demand for goods and
products which has driven up demand for larger requirements. This trend is $0
expected to continue in the coming months. 2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Dan Zawisha | [email protected]
Outlook 12%
The global pandemic’s impact on the local market is being felt, but not at the 10%
same severity as prior market adjustments. While market dynamics indicate a 8%
correction from an otherwise strong multi-year run in declining vacancy and 6%
rising asking rates, there is still 6.0 million square feet of active tenant 4%
requirements in the market. Over a million square feet of these requirements 2006 2008 2010 2012 2014 2016 2018 2020
are coming from the construction and material industry. The market is set to
rebound quickly as construction resumes and warehouse demand drives
leasing activity. Increased demand from e-commerce was evident in the Average asking rent ($ p.s.f.)
Direct
second quarter as Pittsburgh-based American Eagle Outfitters adjusted
Sublease
towards a more online model, and as a result, began scouting other markets $8
for distribution centers. Other short-term uses will be driving demand as well,
$6
including cold storage for increased grocery store warehousing and
manufacturing facilities for essential products like masks and sanitizer. $4
$2
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Justin Simakas | [email protected]
With the delivery of nearly 1.8 million square feet this quarter, the construction Total vacancy
pipeline quickly shrunk to 2.4 million square feet, over 1 million of which is a 14%
built-to-suit for a confidential eCommerce company in Auburndale. While 12%
there haven’t been recently announced projects ramping up for construction, 10%
8%
a whopping 12 million square feet of potential spec and built-to-suit projects 6%
sit in the proposed pipeline. If large blocks continue to be leased without 4%
ample construction to follow, asking rates may begin to see more aggressive 2%
0%
appreciation. To date, they have remained stable, and are up just 1.2 percent
2006 2008 2010 2012 2014 2016 2018 2020
year-over-year.
2,000,000
As with most markets, food and beverage distributors in Portland have seen
an increase in consumer demand following the onset of COVID-19. Mission -
Foods and Bridgetown Natural Foods both signed substantial leases while 2016 2017 2018 2019 YTD
C&S Wholesale Grocers occupied 349,000 square feet in Troutdale. However, 2020
manufacturers and wholesale suppliers remain strained with major vacates
such as CNH Parts & Service leaving 246,000 square feet at Prologis PDX and Total vacancy
office and janitorial supply distributor Essendant closing their 195,500-square-
10%
foot facility at Rivergate Corporate Center.
8%
Development activity remains buoyant with over 4.2 million square feet still in 6%
the pipeline, over half of which is planned to be owner-user or build-to-suit 4%
properties. Still under development are Intel’s multi-billion dollar, 1.5 million 2%
square foot expansion of its D1X fab, JSR Micro’s nearby $100 million facility, 0%
and Columbia Distributing’s 530,000-square-foot planned consolidation in 2006 2008 2010 2012 2014 2016 2018 2020
Canby.
Leasing activity on Class A product continues to drive positive absorption in Total vacancy
the market. Quanex Building Products, TireHub, and Living Spaces all 14%
occupied their spaces in newly constructed warehouses in West Sacramento. 12%
10%
All of these deals were between 40,000 and 75,000 square feet, the size range 8%
that received the highest share of Q2 deal activity. Unfortunately, few viable 6%
spaces in the 40,000 to 100,000 square-foot size range remain, with the bulk of 4%
these availabilities either under construction or still proposed. With most 2%
0%
projects in the development pipeline for big-block space, the market for that
2006 2008 2010 2012 2014 2016 2018 2020
size range will remain tight.
Outlook
With a large volume of speculative inventory anticipated to deliver by 2022, Average asking rent ($ p.s.f.)
Direct
vacancy could see an uptick as product hits the market. Regardless of two Sublease
large move-outs in the first half, Imperial Toy vacating in Q1 and Ceva $1.10
$1.00
Logistics downsizing in Q2, absorption is likely to rebound in the second half $0.90
of the year. E-commerce users are expected to occupy an additional 4 million $0.80
square feet over the next few years. Medical device companies, online $0.70
groceries, and tenants with a need for cold storage, may be additional $0.60
$0.50
industries to look out for in the short term. 2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Tony Rizzo | [email protected]
Disruptions in the supply chain have been fully exposed as the Northwest 2,000,000
Seaport Alliance saw its lowest January to May container volume since 2009.
Despite this, e-commerce companies have signed for over 1.9 million square 0
2016 2017 2018 2019 YTD
feet year to date in all corners of the market, as demand for online orders have 2020
spiked. Some large retailers have a backlog of inventory due to months of
closures and are looking for short-term space to store surplus goods, the case Total vacancy
with IKEA leasing 200,000 square feet for one year at the newly built LPC One in 10%
Frederickson. 8%
6%
Sublease space increased marginally but availability remains extremely low at 4%
only 0.4% of total inventory. Only one sublease space over 100,000 square feet 2%
has hit the market thus far, likely due to many distribution operators and 0%
manufactures being deemed essential amidst the stay-at-home order. 2006 2008 2010 2012 2014 2016 2018 2020
Landlords are still holding strong on rents but with vacancy on the rise, tenants
are gaining leverage.
Average asking rent ($ p.s.f.)
Outlook Direct
Sublease
Strong ongoing demand from e-commerce tenants should help bring down
vacancy before year end, especially as spec development is put on hold. There $0.75
is still uncertainty around Boeing as COVID related layoffs have begun, cancelled $0.60
orders continue and the 737 Max grounding is still looming. The Puget Sound
industrial market has shown its strength through the pandemic but the future of $0.45
COVID-19 continues to be a question mark. $0.30
For more information, contact: Blake Auckland | [email protected] 2006 2008 2010 2012 2014 2016 2018 2020
Outlook 2%
2006 2008 2010 2012 2014 2016 2018 2020
users that are selling their buildings, the East Side’s inventory of mid-large 1,000,000
scale warehouse and distribution centers continued to drive absorption. While
modest at 250,000 square feet, absorption over the second quarter worked to 0
bring the year-to-date total to 818,708 square feet, already nearing 2019 totals. 2016 2017 2018 2019 YTD
2020
Most move-ins were 50,000 square feet and under this quarter and will be
dwarfed by nearly 1.2 million square feet of anticipated move-ins over the next
six months by firms like Refresco, Skar Audio, Commercial Fitness Concepts Total vacancy
and others. 14%
12%
10%
Factoring in active tenant requirements that far outweigh available space, we 8%
are likely to see tightening vacancy over future quarters – especially if the 6%
construction pipeline continues to slow. This will also have impact on asking 4%
2%
rents, which increased negligibly over the second quarter but are still up 3.7 0%
percent year over year. 2006 2008 2010 2012 2014 2016 2018 2020
Outlook
The East Side submarket’s influence on the overall Tampa industrial market Average asking rent ($ p.s.f.)
appears to be amplified in light of COVID-19, due to the prevalence of larger Direct
$7
Sublease
warehouse and distribution users and a concentration of new construction. $6
With smaller, local service firms likely to be more impacted by the pandemic, $5
the rest of Tampa’s submarkets are likely to see relatively muted activity. Still, $4
submarkets across Tampa continue to perform well with historically low $3
vacancy rates and continued rent appreciation. $2
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Kyle Koller | [email protected]
While the Metro DC industrial market experienced an overall decline in leasing Supply and demand (s.f.) Net absorption
activity, there were still 11 deals signed over 10,000 square feet The Kloke Deliveries
Group signed the largest lease for 46,614 square feet at 3900 Stonecroft 5,000,000
Boulevard. The market also experienced its seventh straight quarter of
occupancy gains.
Frederick County has generated significant interest from tenants this quarter,
driven by its discounted pricing and landlord willingness to do shorter-term 0
2016 2017 2018 2019 YTD
deals. Kroger’s 350,000-square-foot development on Geoffrey Way is also an
2020
encouraging sign for the area as the property will service online grocery
delivery, and displays the feasibility of a distribution center with farther
proximity to population centers versus other submarkets. Total vacancy
14%
As the data center market continues to eat into industrial supply, new product 12%
will help address supply constraints and sustained single-digit vacancy. For 10%
example, 42714 & 42722 Trade West Drive delivered this quarter in Sterling. 8%
6%
Meanwhile, in Suburban Maryland, the development pipeline remains strong 4%
as well. NAI Michael’s 399,050-square-foot project in Lanham is set to deliver 2%
later this year. Over 900,000 square feet have been delivered annually in Metro 0%
2006 2008 2010 2012 2014 2016 2018 2020
DC in four of the last five years, and 2020 is on pace to surpass that.
Outlook
Average asking rent ($ p.s.f.)
While COVID-19 has resulted in an overall decrease in leasing activity, the Direct
Metro DC industrial market remains active in terms of a steady construction Sublease
$12
pipeline which will help address supply constraints. If tenants are priced out
of Northern Virginia or Montgomery County, Prince George’s and Frederick $10
County each provide more affordable options, with additional $8
development underway. $6
$4
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Alex Berets| [email protected]
Leasing was relatively quiet in the second quarter, with a handful of smaller
deals making up the activity outside of one significant transaction. In April, Total vacancy
Itochu Logistics leased the 200,000-square-foot distribution facility 1692 12th 15%
Street in Martin. On the smaller side, ASAP Quality finishing took 16,500 feet in
10%
Muskegon, while Elevator Service leased 11,000 square feet at 833 Ottawa
Avenue NW. In June, the 619,165-square-foot former Knoll Manufacturing 5%
complex at 4300 36th Street in Kentwood sold in fewer than ninety days to an
Ohio Developer who intends to renovate and market the property for lease. 0%
2006 2008 2010 2012 2014 2016 2018 2020
Outlook
We are hopeful the industrial market can rebound in relatively short order
moving forward. Year to date absorption is strong in the West Michigan Average asking rent ($ p.s.f.)
Direct
market, and the harshest effects of the lockdown is likely in the rearview. As Sublease
the pandemic has accelerated a shift from traditional to online shopping, we $5
do not anticipate demand for warehousing space to taper off. Companies will
need more space to keep up with e-commerce demand. Following a pause on
construction earlier in the second quarter, we expect to see new
developments announced and break ground across the region.
$0
2006 2008 2010 2012 2014 2016 2018 2020
For more information, contact: Harrison West | [email protected]
Appendix
60 Industrial Outlook | United States | Q2 2020
Mehtab Randhawa
Director—Industrial Research
Americas Industrial
+1 919 424 8459
[email protected]
Kelsey Rogers
Senior Analyst—Industrial Research
Americas Industrial
+1 919 424 8479
[email protected]
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