Industrial Vacancy Rates Forecast to Rise

WASHINGTON, DC-The National Association of Realtors predicts US industrial vacancy rates will rise from 13.5% now to 15.4% percent in Q3 2010. It also projects annual industrial will show a fall of 10.8% this year and another 11.5% next year.

In addition, it says net absorption of industrial space in the 58 markets it tracks is likely to be a negative 298.7 million square feet this year, and a negative 140.5 million square feet next year. With much of the construction in recent years customized for specific industrial needs, there is an overhang of obsolete structures on the market, says NAR chief economist Lawrence Yun.

“There is an opportunity for non-current owners to look at distressed industrial properties in the current market,” he adds. According to Yun, in Q3 the industrial market experienced a slightly higher increase in vacancy rates due to leasing activity well below historic levels and falling prices.

Industrial property owners’ predicament is made worse, he says, by the need to offer higher levels of tenant concessions than office property owners. At the same time, he continues, the fact that the current condition is so negative may mean prospects for improvement in the next three months are better for the industrial market than the office market.