Boston, MA

BOSTON, July 30  -- National industrial vacancies continued their ascent in the second quarter of 2009, hitting double digit levels - and the industrial vacancy rate closed out the first half of the year standing at 10.16 percent, according to the second quarter industrial report from Colliers International, the global real estate services firm. This quarter-over-quarter rise of 63 basis points marked the sixth consecutive quarterly increase in the national industrial vacancy rate, and a jump of 122 basis points since the beginning of 2009. This latest move in the national vacancy rate takes vacancy levels back to the second quarter of 2004, and just 24 basis points from the cyclical high hit in Q1'04, which was 10.4 percent.

Industrial net absorption for the quarter easily exceeded the drops in occupancy witnessed during the 2001-2002 down cycle, with absorption registering negative 57.4 million square feet (msf) at the end of Q2'09. Forty-seven of the 56 markets surveyed by Colliers reported negative absorption, and year to date, overall warehouse absorption registered negative 99.7 msf. By way of comparison, during the previous down cycle years of 2001 and 2002, full year absorptions came in at negative 35.7 msf and negative 29.8 msf respectively.

With a quickly draining development pipeline, Q2 new industrial construction came in at only 16.7 msf, which pales in comparison to the average new construction of 43.5 msf over the past 10 quarters and a cyclical high of 55.7 msf in the fourth quarter of 2007. Construction completions have now dropped below the lows seen during the aforementioned down cycle years of 2001 and 2002.

In terms of brand new construction, tough market conditions and a very difficult lending environment deterred efforts. Indeed, new developments underway fell to just 35 msf, compared to 66.4 msf at the end of 2008 and considerably down from the 124.4 msf during the year-ago period.

Ongoing weak demand took its toll on warehouse rents, which posted another decline in the April through June period - from $5.27 per square foot (psf) at the end of Q1 to $5.09 psf at mid-year. This represents a 3.5 percent downward move, and compared to year-ago levels, the average warehouse rent fell 9.6 percent. Again, 47 of the 56 markets surveyed by Colliers showed a drop in average warehouse rents during Q2.

"The U.S. warehouse market posted one of its weakest quarters since record-keeping began - its only saving grace was the dearth of new construction, which kept the vacancy rate from spiking even more severely," reported Ross Moore, executive vice president and director of market & economic research for Colliers International. "In general, healthy warehouse users are sitting tight right now. Their preference is to make do with their current premises and if conditions dictate, they favor signing short-term leases. Meanwhile, firms that have seen a dramatic drop-off in business are giving back space and consolidating where possible, in an effort to rein in costs. Our immediate outlook for industrial is 'more of the same' - making leasing conditions quite arduous for most warehouse owners and investors."

U.S. Industrial Vacancies - Year over Year

MARKET                          VACANCY RATE             VACANCY RATE
                                    JUNE 30, 2008              JUNE 30, 2009

Atlanta, GA                       11.8                             12.9
Bakersfield, CA                   5.4                               6.8
Baltimore, MD                   18.1                             21.6
Boise, ID                            6.5                             11.2
Charleston, SC                   7.1                               9.6
Charlotte, NC                     7.2                               8.3
Chicago, IL                        9.4                              11.7
Cincinnati, OH                    6.8                               9.5
Cleveland, OH                    7.7                               7.8
Columbia, SC                     2.9                               7.5
Columbus, OH                    9.7                              12.0
Dallas-Ft. Worth, TX            9.5                              11.2
Denver, CO                        7.1                               8.7
Detroit, MI                        13.1                              13.9
Fairfield, CA                      10.2                              11.2
Fresno, CA                         6.0                                6.9
Ft. Lauderdale-Broward, FL  6.2                                9.4
Greenville, SC                    9.9                              10.8
Hartford, CT                       9.9                                9.4
Honolulu, HI                       4.0                                5.1
Houston, TX                       5.9                                6.9
Indianapolis, IN                  8.1                                7.0
Jacksonville, FL                  7.0                               11.7
Kansas City, MO                 6.4                                7.8
Las Vegas, NV                    8.5                               13.5
Little Rock, AR                  15.2                               13.0
Los Angeles -
Inland Empire, CA               9.9                              15.1
Los Angeles, CA                  3.3                                4.8
Louisville, KY                      7.6                                 8.3
Memphis, TN                     13.9                               13.9
Miami, FL                           6.3                                  9.1
Milwaukee, WI                   7.5                                  8.1
Minneapolis, MN               11.2                                 12.1
Nashville, TN                     6.2                                   8.2
New Jersey - Central          7.8                                  9.5
New Jersey - Northern        6.5                                  7.5
Oakland, CA                      7.6                                  8.5
Orange County, CA            4.3                                  5.6
Orlando, FL                        8.5                                 12.5
Philadelphia, PA                  8.6                                  9.4
Phoenix, AZ                      13.9                                 17.0
Pleasanton/
Walnut Creek, CA               9.2                                 14.7
Portland, OR                       6.9                                   8.2
Raleigh, NC                       18.1                                 21.5
Reno, NV                           10.1                                15.3
Sacramento, CA                 10.2                                11.5
San Diego, CA                     8.5                                10.4
San Francisco Peninsula -
San Mateo, CA                     5.1                                 8.5
San Jose/Silicon Valley, CA  10.0                               12.8
Seattle/Puget Sound, WA       6.1                                 6.3
St. Louis, MO                        6.9                                 6.3
Stockton/San Joaquin
County, CA                         11.8                               16.7
Tampa Bay, FL                      6.9                                 9.3
Washington, DC                   10.4                               12.4
West Palm Beach, FL              8.4                               11.8
   

US - AVERAGE                       8.44                             10.16

About Colliers International

Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 12,700 employees span the world in 294 offices in 61 countries. On a worldwide basis, Colliers manages 1.1 billion square feet, and has revenue of $US 1.6 billion.

Contact Information

Ross Moore
Executive Vice President, Market and Econonic Research
ross.moore@colliers.com

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