Industrial Market Recovery Forecast For 2011

BOSTON-Even though the depletion of inventories may have set the stage for recovery of the US industrial real estate market, a new research paper from Torto Wheaton Research indicates it will take a global recovery and strong growth in global trade for the nation’s industrial markets to enjoy a full comeback. According to TWR senior economist Laura Stone Mortimer, the industrial market will not bottom out till the end of 2010, with demand for industrial space not returning till 2011.

“Whether or not the recession is over, this year’s peak shipping season is likely to disappoint, making businesses unlikely to consider acquiring new distribution space for some time,” she writes in the report. “Currently, there are no signs of recovery in the nation’s supply chain. Times remain tough for the ocean shipping industry and for the rail and trucking industries as well, as most major partners are also trying to recover from the global downturn.”

According to Mortimer, air freight, typically a leading indicator for a recovery in the shipping industry, remains flat. Furthermore, she points out, orders for both back-to-school merchandise and holiday items remain well below last year’s levels. The falloff suggests not only that peak season will prove disappointing but that new orders will not lead to increased demand for distribution or warehouse space till well into next year.

When it is time for a rebound, the economist says, timing will vary according to type of market, with the larger hubs—particularly Chicago, Atlanta and Dallas—turning the corner before port markets. “[T]he recovery will begin there,” she asserts. For the larger port markets, recovery occur only when growth in imports turns positive. But recovery for both hub and port markets is not likely to happen for at least four to six quarters, she remarks. “The rest of 2009 can be written off in terms of a peak shipping season or returning demand for industrial space,” she says.