U.S. Industrial. September 2019

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1 U.S. Industrial September 2019

2 Net Absorption & Net Deliveries in SF Vacancy Industrial Fundamentals 140M 120M 100M 80M 60M 40M 20M 0M (20M) (40M) (60M) Forecast Net Absorption Net Deliveries Vacancy 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0%

3 Top Net Deliveries Dallas-Fort Inland Empire Houston Atlanta Chicago Spartanburg Savannah Phoenix Cincinnati Indianapolis Nashville Las Vegas Columbus New York Seattle Kansas City Denver San Antonio Philadelphia Charlotte 7.4M 7.1M 6.8M 6.6M 6.6M 6.2M 5.8M 5.5M 5.5M 5.4M 5.1M 4.7M 4.6M 4.3M 4.1M 15.7M 13.8M 13.4M 24.4M 0M 5M 10M 15M 20M 25M 30M Net Deliveries (Last 4 Quarters) 29.0M

4 Net Deliveries As Share of Inventory, Most Savannah Reading Spartanburg Northwest Arkansas Charleston Las Vegas Inland Empire San Antonio Dallas-Fort Worth Harrisburg Austin Stockton Reno Nashville Houston Salt Lake City Lehigh Valley Orlando Cincinnati Indianapolis 2.1M 7.4M 3.9M 7.1M 3.7M 5.8M 24.4M 4.6M 29.0M 2.9M 3.0M 3.5M 2.5M 6.2M 15.7M 3.3M 2.8M 3.6M 6.6M 6.6M (4%) 0% 4% 8% 12% Net Deliveries as Share of Inventory (Last 4 Quarters) Note: Includes markets with 2M+ SF delivered. Cleveland Milwaukee Detroit Rochester Richmond Grand Rapids Minneapolis Oklahoma City Orange County Greenville Greensboro Sacramento Birmingham Pittsburgh Boston Norfolk Long Island Providence Los Angeles San Jose 2.1M 1.4M 3.1M 0.6M 0.6M 0.7M 1.5M 0.4M 0.8M 0.3M 0.4M 0.3M 0.1M 0.2M 0.3M -0.1M 0.0M 0.0M -1.1M -0.5M (4%) 0% 4% 8% 12% Net Deliveries as Share of Inventory (Last 4 Quarters) Note: Includes markets with 100M+ SF inventory.

5 Construction Starts in SF Under Construction SF Starts and Under Construction 90M 300M 75M 250M 60M 200M 45M 150M 30M 100M 15M 50M 0M M Starts Under Construction

6 Most Space Under Construction Dallas-Fort Worth Inland Empire Chicago Atlanta Houston Phoenix Lehigh Valley Indianapolis Cincinnati Charlotte Philadelphia Reno Jacksonville Baltimore Spartanburg Louisville Scranton East Bay Memphis New York 10.6M 8.3M 8.0M 8.0M 7.9M 7.5M 6.9M 6.9M 6.7M 6.4M 6.3M 5.9M 5.6M 5.5M 5.2M 14.3M 17.6M 21.5M 28.1M 32.8M 0M 5M 10M 15M 20M 25M 30M 35M Under Construction

7 Space Under Construction As Share of Inventory Reno Savannah Spartanburg Scranton Lehigh Valley Jacksonville Inland Empire Dallas-Fort Worth Phoenix Louisville Baltimore Atlanta Cincinnati Charlotte Indianapolis Houston East Bay Memphis Chicago Philadelphia 6.9M 32.8M 28.1M 6.9M 8.3M 5.9M 6.4M 5.1M 10.6M 6.3M 6.7M 17.6M 8.0M 7.9M 8.0M 14.3M 5.6M 5.5M 21.5M 7.5M 0% 2% 4% 6% 8% 10% Under Construction as Share of Inventory Note: Includes markets with 5M+ SF under construction. Providence Norfolk San Diego Detroit Birmingham Grand Rapids New York Kansas City Pittsburgh Los Angeles Cleveland Northern New Jersey Sacramento Minneapolis Rochester San Jose Boston Long Island Orange County Hartford 1.4M 0.9M 1.5M 4.1M 0.9M 1.2M 5.2M 1.9M 1.1M 5.1M 1.8M 1.2M 0.8M 1.6M 0.4M 0.7M 1.1M 0.5M 0.8M 0.1M 0% 2% 4% 6% 8% 10% Under Construction as Share of Inventory Note: Includes markets with 100M+ SF inventory.

8 Under Construction SF Under Construction, by Subtype 350M 300M 250M 200M 150M 100M 50M 0M Logistics Specialized Industrial Flex

9 Net Absorption & Net Deliveries in SF Vacancy Industrial Fundamentals: Base Case Forecast 140M 120M 100M 80M 60M 40M 20M 0M (20M) (40M) (60M) Forecast Net Absorption Net Deliveries Vacancy 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0%

10 Leasing Volume in SF Quarterly Industrial Leasing Volume 350M 300M 250M 200M 150M 100M 50M 0M Volume Estimated Additional Volume

11 Top Net Absorption Dallas-Fort Worth Inland Empire Chicago Atlanta Houston Spartanburg Memphis Indianapolis Lehigh Valley Phoenix Las Vegas New York Kansas City Columbus Stockton Cincinnati Savannah Philadelphia Charlotte Denver 9.3M 7.4M 6.8M 6.3M 6.0M 5.9M 5.6M 5.4M 5.2M 5.0M 4.5M 4.4M 4.3M 4.2M 4.1M 3.9M 14.1M 12.7M 25.1M 23.4M 0M 5M 10M 15M 20M 25M 30M Net Absorption (Last 4 Quarters)

12 Net Absorption & Net Deliveries in SF Vacancy Industrial Fundamentals: Base Case Forecast 140M 120M 100M 80M 60M 40M 20M 0M (20M) (40M) (60M) Forecast Net Absorption Net Deliveries Vacancy 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0%

13 Net Absorption & Net Deliveries in SF Vacancy Logistics Fundamentals 120M 100M 80M 60M 40M 20M 0M (20M) (40M) (60M) (80M) Forecast Net Absorption Net Deliveries Vacancy 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0%

14 Net Absorption & Net Deliveries in SF Vacancy Logistics Fundamentals: Base Case Forecast 120M 100M 80M 60M 40M 20M 0M (20M) (40M) (60M) (80M) Forecast Net Absorption Net Deliveries Vacancy 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0%

15 Net Absorption & Net Deliveries in SF Vacancy Industrial Fundamentals 20M 15M 10M 5M 0M (5M) (10M) (15M) (20M) Forecast Net Absorption Net Deliveries Vacancy 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0%

16 Net Absorption & Net Deliveries in SF Vacancy Industrial Fundamentals: Base Case Forecast 20M 15M 10M 5M 0M (5M) (10M) (15M) (20M) Forecast Net Absorption Net Deliveries Vacancy 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0%

17 Net Absorption & Net Deliveries in SF Vacancy Flex Fundamentals 12M 10M Forecast 14.0% 13.0% 8M 12.0% 6M 11.0% 4M 10.0% 2M 9.0% 0M 8.0% (2M) 7.0% (4M) 6.0% (6M) 5.0% (8M) 4.0% Net Absorption Net Deliveries Vacancy

18 Net Absorption & Net Deliveries in SF Vacancy Flex Fundamentals: Base Case Forecast 12M 10M Forecast 14.0% 13.0% 8M 12.0% 6M 11.0% 4M 10.0% 2M 9.0% 0M 8.0% (2M) 7.0% (4M) 6.0% (6M) 5.0% (8M) 4.0% Net Absorption Net Deliveries Vacancy

19 Rent Per SF Annual Rent Growth Industrial Rent Growth $10 $9 Forecast 8% 6% $8 4% $7 $6 $5 $4 2% 0% (2%) (4%) $3 Market Rent Year-Over-Year Rent Change (6%)

20 Top Rent Growth Markets Providence Stockton Sacramento Las Vegas Salt Lake City Nashville Orlando Boston East Bay Inland Empire Richmond Jacksonville Northern New Jersey San Jose San Diego Atlanta Fort Lauderdale Philadelphia Phoenix Charlotte Note: Includes markets with 100M+ SF inventory. 11.9% 10.9% 10.0% 9.8% 8.5% 9.2% 9.6% 8.2% 8.1% 7.8% 7.7% 7.5% 7.4% 7.2% 7.1% 6.9% 6.8% 6.7% 6.5% 6.4% 0% 4% 8% 12% 16% Rent Growth, YOY Pittsburgh Lehigh Valley Washington Dayton Hartford Denver Memphis Norfolk Milwaukee Portland Minneapolis Louisville San Antonio Toledo Tulsa Akron Houston Cleveland Saint Louis Kansas City 4.6% 4.5% 4.5% 4.3% 4.3% 4.2% 4.2% 4.2% 4.1% 3.9% 3.7% 3.7% 3.4% 3.2% 3.2% 3.2% 2.9% 0.6% 2.4% 2.9% 0% 4% 8% 12% 16% Rent Growth, YOY Note: Includes markets with 100M+ SF inventory.

21 Rent Per SF Annual Rent Growth Industrial Rent Growth: Base Case Forecast $10 $9 Forecast 8% 6% $8 4% $7 $6 $5 $4 2% 0% (2%) (4%) $3 (6%) Market Rent Year-Over-Year Rent Change

22 Base Case Rent Growth Forecast, by Market Sacramento Salt Lake City Providence Stockton Boston Las Vegas Richmond Orlando San Diego Inland Empire Nashville Northern New Jersey East Bay Fort Lauderdale Atlanta San Jose Charlotte Orange County Seattle Jacksonville 4.4% 4.2% 3.8% 3.8% 3.8% 3.8% 3.6% 3.5% 3.5% 3.4% 3.2% 3.2% 3.1% 3.1% 3.1% 3.0% 2.9% 2.8% 2.8% 2.8% 0% 4% 8% 12% 16% Four-Year Average Forecast Rent Growth, YOY Note: Includes markets with 100M+ SF inventory. Louisville Norfolk Detroit Lehigh Valley Denver Portland Chicago San Antonio Tulsa Toledo Hartford Rochester Akron Dayton Milwaukee Houston Cleveland Memphis Saint Louis Kansas City 2.0% 2.0% 2.0% 2.0% 1.9% 1.9% 1.8% 1.8% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.6% 1.5% 1.4% 1.2% 1.0% 0.7% 0% 4% 8% 12% 16% Four-Year Average Forecast Rent Growth, YOY Note: Includes markets with 100M+ SF inventory.

23 Rent Per SF Annual Rent Growth Logistics Rent Growth $10 $9 Forecast 8% 6% $8 4% $7 $6 $5 $4 2% 0% (2%) (4%) $3 Market Rent Year-Over-Year Rent Change (6%)

24 Rent Per SF Annual Rent Growth Logistics Rent Growth: Base Case Forecast $10 $9 Forecast 8% 6% $8 4% $7 $6 $5 $4 2% 0% (2%) (4%) $3 (6%) Market Rent Year-Over-Year Rent Change

25 Rent Per SF Annual Rent Growth Specialized Rent Growth $10 $9 Forecast 8% 6% $8 4% $7 $6 $5 $4 2% 0% (2%) (4%) $3 Market Rent Year-Over-Year Rent Change (6%)

26 Rent Per SF Annual Rent Growth Specialized Rent Growth: Base Case Forecast $10 $9 Forecast 8% 6% $8 4% $7 $6 $5 $4 2% 0% (2%) (4%) $3 (6%) Market Rent Year-Over-Year Rent Change

27 Rent Per SF Annual Rent Growth Flex Rent Growth $20 $18 Forecast 8% 6% $16 4% $14 $12 $10 $8 2% 0% (2%) (4%) $6 Market Rent Year-Over-Year Rent Change (6%)

28 Rent Per SF Annual Rent Growth Flex Rent Growth: Base Case Forecast $20 $18 Forecast 8% 6% $16 4% $14 $12 $10 $8 2% 0% (2%) (4%) $6 (6%) Market Rent Year-Over-Year Rent Change

29 Sales Volume Annual Industrial Sales Volume $90B $75B $60B $45B $30B $15B $0B Q1 Q2 Q3 Q4

30 Sales Volume Properties Sold (000s) Annual Industrial Sales Volume and Buildings Sold $90B 30 $75B 25 $60B 20 $45B 15 $30B 10 $15B 5 $0B Q1 Q2 Q3 Q4 Buildings Sold (Annual Rate) 0

31 Sales Volume Quarterly Industrial Adjusted Sales Volume $40B $35B $30B $25B $20B $15B $10B $5B $0B Volume Entered by Quarter End Entered After Quarter End

32 Industrial Sales Volume, Top 15 $1.5B 1.3B $1.0B 1.1B 1.0B $0.5B 0.7B 0.5B 0.5B 0.4B 0.4B 0.4B 0.4B 0.4B 0.3B 0.3B 0.3B 0.3B $0.0B Sales Volume (19Q2) Sales Volume (Average Previous 8 Quarters)

33 Price per SF Industrial Average Transaction Price $100 Forecast $90 $80 $70 $60 $50 $40 Transaction Price/Unit

34 Price per SF Annual Price Growth Industrial Market Price $100 15% $90 10% $80 5% $70 0% $60 (5%) $50 (10%) $40 Year-Over-Year Change Transaction Price/Unit Avg Price/Unit (15%)

35 Price per SF Annual Price Growth Industrial Market Price: Base Case $100 15% $90 10% $80 5% $70 0% $60 (5%) $50 (10%) $40 Year-Over-Year Change Transaction Price/Unit Avg Price/Unit (15%)

36 Industrial Cap Rates

37 Industrial Industrial Cap Rate Forecast 12% 11% Forecast 10% 9% 8% 7% 6% 5% 4% 3% 2% Average Cap Rate BBB Yield

38 These materials contain financial and other information from a variety of public and proprietary sources. CoStar Group, Inc. and its affiliates (collectively, CoStar ) have assumed and relied upon, without independent verification, the accuracy and completeness of such third party information in preparing these materials. The modeling, calculations, forecasts, projections, evaluations, analyses, simulations, or other forward-looking information prepared by CoStar and presented herein (the Materials ) are based on various assumptions concerning future events and circumstances, which are speculative, uncertain and subject to change without notice. CoStar does not represent, warrant or guaranty the accuracy or completeness of the information provided herein and shall not be held responsible for any errors in such information. Any user of the information provided herein accepts the information AS IS without any warranties whatsoever. To the maximum extent permitted by law, CoStar disclaims any and all liability in the event any information provided herein proves to be inaccurate, incomplete or unreliable CoStar Realty Information, Inc. No reproduction or distribution without permission.