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Warehouse Rent Growth ‘As Good As It Gets’ in Second Quarter
Tim Trainor / CoStar / July 31, 2013
Rents in Warehouse Distribution Markets Play Catch-Up in Second Quarter as Increased Demand Spreads Across More Markets and Continues To Outpace Meager New Construction
Rents in a handful of top warehouse distribution markets posted year-over-year rent gains of 5% or more in the second quarter, virtually unheard of in the staid property sector more accustomed to 1.3% annual rental rate growth.
For the U.S. warehouse market as a whole, the average asking net rent rose to $4.75 per square foot, a 2.1% increase from one year ago. The upward trend in rents was boosted by 37.3 million square feet of positive net absorption during the quarter, the second largest quarterly absorption since the recovery started, and reflected continued steady demand from warehouse-distribution tenants at a time when very little new space is being added by developers.
“I think we can finally say that rent growth is back,” said Rene Circ, director of industrial research for CoStar’s Property and Portfolio Research (PPR), who with Senior Economist Shaw Lupton, this week presented CoStar’s Midyear 2013 Industrial Review and Outlook. The full presentation is available to subscribers at www.costar.com.
“While we have seen some previous rent growth in terms of diminishing free rent and concessions, now landlords in a larger number of markets have begun raising actual asking rents,” added Circ. “And it’s a good cross section with 142 of the 210 submarkets we track seeing rent increases during the quarter. We’re seeing very good rent growth across the board.”