U.S.

Research Report
INDUSTRIAL MARKET OUTLOOK
Q4 2017

U.S. Industrial Market Firing on

all Cylinders Heading into 2018
James Breeze, National Director of Industrial Research | USA

Featured Highlights
>> At year-end 2017, only 5.1% of the nation’s industrial space was vacant—the
lowest rate on record despite 243 million square feet of new supply being Market Indicators
Relative to Prior Quarter
completed in 2017. Product under construction remains robust at 219 million 2017 2018*
square feet, the second highest mark on record.
VACANCY
>> The nation’s manufacturers continue to increase output and companies continue
NET ABSORPTION
to relocate operations back to the U.S. The ISM Manufacturing Index rose to 59.7
in December as new orders surged. With “reshoring” on the rise due to consumer CONSTRUCTION
habits and government policies, industrial real estate with a manufacturing
RENTAL RATE**
component will likely see increased demand this year.
>> E-commerce sales grew 16% in Q3 2017 (the most recent data available) * Projected
** Warehouse rents
compared with Q3 2016, and now represent 10.1% of total non-auto retail sales.
E-commerce sales growth will continue to be the driving force for industrial real
estate in 2018.
>> Warehouse space, especially in urban locations with young populations, will
Summary Statistics | 2017
U.S. Industrial Market
continue to attract top interest for both investors and occupiers in 2018. The push
to service this population base will likely lead to a pickup in small warehouse Vacancy Rate 5.1%
construction as well as conversions of older industrial product within
Change From 2016 -0.7%
in-fill locations.
Markets With Lower 81.0%
>> Tightening markets and new, higher-quality Class A space drove up average Vacancies Compared With 2016
asking rents to $6.29 per square foot per year in Q4 2017, 7.5% higher than the
2017 Absorption (MSF) 254.4
previous year. With vacancy rates expected to remain low because of continued
strong demand, asking rental rates will continue in an upward trajectory this year. Markets With Positive 88.1%
Absorption
>> More than $72 billion in industrial assets changed hands in 2017, among the 243.0
2017 New Supply (MSF)
highest annual totals ever. Transactions were up 20% compared with the previous
year and industrial assets were the only major property type to produce year- New Supply to Inventory 1.6%
over-year gains. Investor interest will remain strong in 2018 as industrial demand Under Construction (MSF) 218.9
continues with the highest gains seen in growing secondary markets near regional
logistic hubs. ASKING RENTS
PER SQUARE FOOT PER YEAR
>> While most signs point to continued strong fundamentals in 2018, headwinds to Average Warehouse/Distribution $5.41
look out for in 2018 include a growing shortage of available labor in many U.S. Center
industrial markets. Also, trade policies should be watched, especially with NAFTA’s Average Manufacturing Space $5.44
future at risk, and tariffs increasing on some imported goods.
Average Flex Space $11.93
The U.S. industrial market completed its second best year on Global Economy and U.S. Tax Bill will Keep
record in 2017, with every key indicator at or near all-time highs.
E-commerce has the industrial real estate market firing on all
U.S. Economy Churning in 2018
cylinders, creating robust demand for big-box buildings, last-mile America’s economic expansion has clocked more than 100 months,
distribution centers, industrial flex space and manufacturing and by mid-2018 this expansion will be the second longest in U.S.
facilities. history, even before taking into account the fact that the economy is
getting new life courtesy of the strengthening global economy and
U.S. Industrial Market the tax cut stimulus from Washington. Despite a distinct pickup in
Q1 2016 to Q4 2017 economic growth after typical winter doldrums early in the year,
100,000,00 6.2%
the real story remains the moderate pace of growth.
90,000,00 6.0%
80,000,00
5.8% Real GDP grew an estimated 2.3% in 2017, exactly in line with the
70,000,00
60,000,00
5.6% consensus forecast a year ago. While that represents a marked
50,000,00 5.4% improvement over the anemic 1.5% growth in 2016, it’s still below
40,000,00
30,000,00
5.2%0
the 2.6% rate in 2014 and 2.9% in 2015—and even they were well
5.0%
20,000,00 shy of the 3.4% average since 1960 through the Great Recession.
4.8%
10,000,00
Still, the economy continues to expand, if slowly, to the benefit of
0 4.6%
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 property markets and most investors.
New Supply (MSF) Absorption (MSF) Vacancy Rate (%)

Source: Colliers International

U.S. Economic Indicators
GDP
Even without the e-commerce boost, industrial would likely still be Q4 2017 + 2.6%
performing well. Consumer spending was solid in 2017 with retail Q3 2017 + 3.2%
sales completing an eighth consecutive year of growth. ISM

Furthermore, nearly all major ports posted year-over-year gains in 59.7%, up 5.0 percentage points
December 2017 PMI®
loaded inbound container volume—the most important seaport from December 2016
RAIL TIME INDICATORS
driver for warehouse demand.
Total Railcar Traffic + 2.9% since December 16
As we turn to 2018, these driving factors continue to support robust
fundamentals in virtually all industrial markets. These key drivers Intermodal Traffic + 3.9% since December 16

will expand demand even further in secondary markets near inland
ports and large population centers and lead to a resurgence in
demand for both manufacturing space and urban warehouse space
throughout the country. Retailers, wholesalers and third-party
logistics companies are all scrambling to find space near these
locations to gain a competitive advantage and get products to
consumers faster.
Looking forward, the industrial sector could gain from both the
recently-enacted U.S. tax bill and an improving global economy.
However, labor constraints and uncertainty over the direction and
impact of trade policies could ultimately prove to be a headwind for
the sector.
Sources: BEA, ISM, AAR
Consumption, which accounts for over two-thirds of the U.S.
economy, grew by 2.7%—the same rate as in 2016, and virtually
identical to the rate in the preceding years. Households have
broadly recovered from the recession, as their debt burdens are
much reduced and wealth is back at record levels thanks to surging
stock prices and widespread recovery in the housing markets. But
wage growth remains stubbornly weak, notwithstanding the 4.1%
unemployment rate that puts the economy essentially at full
employment, which holds back further gains in consumer spending.

2 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

Job growth continues to be strong, if not quite as robust as earlier manufacturing and trade. The U.S. is a relatively self-sufficient
in the cycle. In fact, job growth peaked in early 2015 and has been economy, with exports accounting for just 12% of GDP, but strong
trending down ever since. Employers have been adding an average global growth will provide more demand for U.S.-produced goods
of 170,000 jobs per month this year, compared to over 250,000 and services.
monthly in 2014 and 2015. With the unemployment rate
Second, the tax cut and reform bill enacted late last year should
consistently below its 5.1% long-term average for over two years
provide a clear, if relatively modest, boost in 2018. The primary
now, firms find it increasingly difficult to hire qualified workers for
stimulus will come from the unfunded tax cuts. In addition, the tax
their open positions.
cuts themselves should unleash more business and consumer
spending, supporting additional economic growth, as we discussed
U.S. Manufacturing Indicators | December 2017
in our recent special report on the tax law.
SERIES SERIES PERCENTAGE
RATE OF TREND*
INDEX INDEX INDEX POINT DIRECTION
(DEC. 2017) (NOV. 2017) CHANGE
CHANGE (MONTHS) Finally, business investment in capital goods and structures should
PMI® continue at an elevated pace, though likely at a decrease from their
59.7 58.2 1.5 Growing Faster 16
torrid growth in 2017, as business confidence remains exceptionally
New Orders 69.4 64.0 5.4 Growing Faster 16
high. Corporate America’s mood has been lifted by a trifecta of
Production 65.8 63.9 1.9 Growing Faster 16 favorable factors: the sweeping tax cuts and reform, business-
Employment 57 59.7 -2.7 Growing Slower 15 friendly regulatory reform in Washington and improving overseas
Supplier markets.
57.9 56.5 1.4 Slowing Faster 20
Deliveries
Inventories 48.5 47.0 1.5 Contracting Slower 3
But the economy also faces some decided headwinds that may limit
Customers'
the positive impacts of the foregoing influences. Notably, the new
42.0 45.5 -3.5 Too Low Faster 6
Inventories tax law is likely to prompt the Fed to more rapidly shift from dovish
Prices 69.0 65.5 3.5 Increasing Faster 22 (pro-growth) to hawkish (anti-inflation) policies that raise interest
Backlog of
56.0 55.0 1.0 Growing Faster 11 rates and slow wage growth. The possibility of trade wars with our
Orders
trading partners in response to more protectionist U.S. trade
Exports 58.5 56.0 2.5 Growing Faster 22
policies is perhaps the greatest near-term risk for the economy.
Imports 57.5 54.5 3.0 Growing Faster 11
The labor market also faces increasing labor shortages that are
Overall Economy Growing Faster 103 being exacerbated in key sectors by curbs on immigration. But
Manufacturing Sector Growing Faster 106
overall, near-term risks seem slanted to the upside.
Industrial real estate will benefit directly from the relatively strong
Looking forward, three factors are likely to drive the economy growth this year, which will support retail spending, housing
upward in 2018. First, the synchronized pickup in economic growth demand and general economic activity, all key drivers for industrial
globally is expected to gain momentum. The International Monetary property demand. Moreover, the tax bill should boost tenant
Fund forecasts that the world economy will expand 3.9% this year demand further. Warehousing and wholesale trade pay some of the
and next, versus 3.7% last year and 3.2% in 2016. This marks the highest effective tax rates of any sector, and thus should benefit
fastest growth since 2010 and can be tied to growing disproportionately from the new lower tax rates.

U.S. Industrial Overview | Q4 2017

UNITED STATES WEST MIDWEST SOUTH NORTHEAST

Number of Markets 71 23 13 24 11
Inventory (MSF) 14,758,248,349 3,540,380,401 4,538,933,637 4,529,134,190 2,149,800,121
% of U.S. Inventory 100% 24.0% 30.8% 30.7% 14.6%
Q4 2017 New Supply 68,979,912 18,670,164 22,709,540 23,275,876 4,324,332
% of U.S. Q4 2017 New Supply 100% 27.1% 32.9% 33.7% 6.3%
2017 New Supply 243,450,109 59,982,677 68,090,949 91,930,030 23,446,453
% of U.S. 2017 New Supply 100% 24.6% 28.0% 37.8% 9.6%
Q4 2017 Absorption (MSF) 72,028,384 12,795,962 22,557,978 28,949,668 7,724,776
% of U.S. Q4 2017 Absorption 100% 17.8% 31.3% 40.2% 10.7%
2017 Absorption (MSF) 254,548,635 57,580,535 65,897,238 91,352,223 39,718,639
% of U.S. 2017 Absorption 100% 17.8% 31.3% 40.2% 10.7%

3 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

Top 30 Markets: Absorption in 2017

C olumbus
Minneapolis -S t. P aul 4.4M
3.4M Hartford
L ehigh
4.3M
Detroit V alley
S ac ramento
4.4M 3.6M
4.5M C hic ago
18.9M P hiladelphia
K ans as Indianapolis 10.4M
S toc kton
4.8M C ity 7.8M
C entral New
8.9M C inc innati
Denver J ers ey
L as 5.1M
3.6M 7.9M
V egas S t. L ouis
7.8M 3.9M Memphis C harlotte B altimore
L os 4.5M 3.6M 4.3M
A ngeles P hoenix Dallas -F ort
4.5M 9.1M Worth A tlanta G reenville
23.3M 22.6M S partanburg
S avannah
Inland A nders on
5.6M
E mpire 3.6M
J ac ks onville
18.3M
3.1M
Hous ton T ampa B ay
6.8M 3.2M S outh F lorida
3.2M
Y T D A bs orption (S F )

3.1M 23.3M
0.5M
5.00M

10.00M

15.00M

>18.00M

Record Demand Spreading Across the
Country
Fundamentals were robust in 2017 with vacancies dropping to their
lowest rate ever thanks to the second best year on record for
overall net absorption. The market continues to be driven by
demand from retailers, wholesalers and third-party logistics
companies looking to expand and modernize supply chains because
of the rapid growth of e-commerce and a solid U.S. economy. The
surge in e-commerce sales continues to be a demand driver in core
industrial markets with Dallas-Fort Worth and Atlanta leading the
way finishing 2017 at 23.3 million square feet and 22.6 million
square feet of overall net absorption respectively. The drive to get
products to consumers quickly is improving fundamentals in many
non-core locations near growing population centers and logistic
hubs. Savannah, Las Vegas and Stockton were the three
fastest-growing markets in the U.S. last year because of access to
seaports, inland ports, ground and rail transportation and growing
population centers.
Robust demand throughout the country lowered the overall
industrial vacancy rate in the U.S. to 5.1%, at year end, down 70
basis points from 2016’s already low mark. Vacancies dropped
during Q4 2017 in a large majority of the markets we track
compared with a year earlier, as net absorption of just over 254
million square feet was the second highest annual total ever
recorded. Development remains strong in core industrial markets,
with Dallas-Fort Worth leading the way at 27.6 million square feet
of new construction, bringing the overall U.S. total to 243 million
square feet, the second highest mark on record. The rapid pace of
new development will not slow in 2018 as more than219 million
square feet was under construction at year-end, also the second
highest mark on record. With many markets reporting a surge in
ground-breakings in early 2018, development will finish the coming
year at or above 2017’s mark.
Essential indicators for industrial real estate demand in the coming
year, including loaded inbound container volumes and intermodal
rail volume, continue to rise. Loaded inbound container volumes

4 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

increased in 2017 in nearly all major seaports. While volumes
continue to grow at a brisk pace in most markets, the largest
year-over-year gains were seen at the ports of Long Beach,
Savannah and Houston, which each increased more than 10%
compared with the same time a year ago. Rail traffic, too, is
experiencing solid growth, with total annual volumes up 3% over
2017. The use of rail in product movement will continue to increase
in the coming year and will keep demand strong in major rail hub
markets including Chicago, Kansas City, St. Louis and Atlanta.
The manufacturing sector also continues to post robust
fundamentals. The Institute for Supply Management’s Purchasing
Managers’ Index remained strong at 59.7 in December, near its high
point in this business cycle. The index has been in expansionary
To be sure, portfolio sales also had a strong year, growing at a 44%
year-over-year pace in 2017. Still, these deals represented only
36% of all activity in 2017 versus a 50% share back in 2015. Deal
volume was up in 2017 across all industrial subtypes and across all
major geographies. Volume was slightly stronger in the secondary
and tertiary markets relative to the largest markets in the U.S. This
outperformance was based on two factors: a decline in available
product for sale in core industrial markets, and cap rates that
averaged over 100 bps higher in these smaller markets as investors
chased higher yield opportunities.
Top 5 MSAs* in 2017: Transaction Volume
Los Angeles $5,173 million

territory for 16 consecutive months. New orders, a key figure in Chicago $4,615 million
forecasting manufacturing demand, surged at the end of 2017 and
Washington DC/Virginia Suburbs $3,122 million
finished at a high mark of 69.4%. With manufacturing output
projected to remain strong this year, look for industrial demand Dallas $2,991 million

from manufacturers to increase in the coming quarters and push up Atlanta $2,887 million
demand in markets with robust manufacturing capabilities *Metropolitan Statistical Area
throughout the mid-west and south-east parts of the country. Source: Colliers International

Industrial Real Estate Stands Out in 2017 Top 5 MSAs* in 2017: Net Absorption

Sales Growth Dallas-Fort Worth 23.3 MSF

Atlanta 22.6 MSF

The industrial real estate sector had an exceptional 2017 with over
$72 billion in sales transactions volume, a 20% increase compared
with 2016 according to Real Capital Analytics. Industrial was the
only major property sector to post a gain for the year and stands in
marked contrast to the 7% decline in overall property sales. 2017
also marked the first time industrial surpassed the retail sector in
sales volume in almost a decade.
The industrial sector outselling the retail sector is not just a story
of the decline in retail; it also reflects the opportunities that
investors see in industrial properties. Industrial sale activity for
2017 was at near-record levels; only 2015 saw higher sales. But
activity in 2015 was heavily influenced by the surge in portfolio
sales. In 2017, the market was dominated by single-asset sales
which came in at a record $45.9 billion, up 9% from 2016.
Chicago 18.9 MSF
Inland Empire 18.3 MSF
Philadelphia 10.4 MSF
*Metropolitan Statistical Area
Source: Colliers International
Looking ahead, investors will continue to focus on secondary and
tertiary markets. Markets with large quantities of urban
warehousing with high rents and low vacancies, including the
Washington, D.C. area and South Florida, also will see increased
institutional owner interest. And markets with manufacturing
capabilities should also see increased demand. One such market is
Detroit, with increases in institutional demand due to its emerging
distribution market and resurging manufacturing presence.

5 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

 What’s Ahead for Industrial Real Estate?
Five Factors That Will Impact Industrial Real Estate Demand in 2018

1 ASKING RETAIL RATES

The asking rental rate for all product types increased in 2017 to an all-time record-high average of $6.29 per square foot/per year NNN.
In previous cycles, record-high rents spelled the end of expansion, but this cycle is different because of the different functionality of warehouses.
They are no longer just cost centers but revenue producers due to the increased significance of e-commerce. They are also a tool to lower
transportation costs, which make up a larger and growing portion of overall supply chain costs.

While rising rents will not temper overall demand for industrial product, it will accelerate a shift toward secondary markets as alternatives to
nearby core markets with above-average rents. Three markets close enough to core industrial markets to provide a lower-rent alternative with the
same logistics advantages are Phoenix, Memphis and Indianapolis. These markets are already posting fundamentals close to the levels of core
markets and will grow sharply in the coming quarters.

2 US TRADE POLICY
When we entered 2017, U.S. trade policy seemed to be on solid ground, NAFTA was making headway in negotiations, and trade pacts
with China were solidifying. This changed the second half of 2017 with word that the future of NAFTA was less certain and tariffs were issued for
foreign products including solar panels and appliances. The end of the NAFTA trade agreement could negatively affect industrial real estate
markets near the borders where ground and rail transportation pass through, including Dallas-Fort Worth to the south and Minneapolis to the
north, as well as states such as Ohio, Tennessee and South Carolina with significant auto manufacturing. Increasing tariffs on goods manufactured
in Asia could also lower inbound seaport volumes and demand for space in nearby industrial markets. While neither policy has been set in stone,
they both warrant watching and could have a major impact on demand in late 2018.

3 MANUFACTURING
While markets that depend on foreign trade could be negatively affected by policies enacted in Washington, markets with the assets
necessary for modern manufacturing could thrive. The U.S. tax bill is already increasing business investment in the U.S., including the planned
addition of manufacturing operations. This, along with the already growing trend of “reshoring,” will significantly increase demand for industrial
real estate with a manufacturing component, or distribution space that supports local manufacturing operations in the coming quarters. Most
manufacturing growth will be situated in pro-business markets with an educated workforce with markets in Ohio, Michigan, Texas, Tennessee,
Georgia and South Carolina best positioned for this coming demand in 2018—assuming the business climate is not undercut by the trade risks.

4 LABOR AVAILABILITY
The demand for warehouse labor has been magnified by e-commerce distribution’s heavy employee counts and significant seasonal
spikes in demand. Traditional warehouse facilities that supply brick-and-mortar stores or distribute wholesale goods have an average employee
count of one employee per 2,000 square feet according to industry insiders. By contrast, e-commerce fulfillment centers can have an employee
count as high as one employee per 700 square feet. Thus, e-commerce occupiers can require two to three times the amount of labor as a
traditional distribution user needs. With labor demand increasing, more companies will require more advanced site selection processes to grind
down the exact submarkets where available labor can be found, and this process in site selection will gain importance over a submarket’s logistics
advantages and building functionality. This will increase demand for industrial product in areas with a larger available labor pool including the
Inland Empire and Atlanta.

5 E-COMMERCE
E-commerce will remain the top driver of industrial real estate demand in 2018. E-commerce already accounts for over 10% of non-auto
retail sales in the U.S. and, according to eMarketer, that number will increase to over 16% by 2021. Occupiers are scrambling to modernize and
expand distribution networks to prepare for this increase in demand. E-commerce will keep demand strong across the country but will create the
largest growth in markets with available labor, land to develop modern distribution centers, growing populations and usable industrial product near
urban centers. While we expect demand to remain robust in traditional core markets including Chicago and Philadelphia, markets with growing
population centers including Las Vegas and growing logistic hub locations in Cincinnati and Stockton will continue to prosper.

All in all, 2017 continued to set the bar high for industrial market performance. This year looks to further that trend as the industrial market evolves into one of the most
sought after, important commercial property types in the country.

6 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

Supplemental Data: Largest 20 Markets
Vacancy vs. Absorption Warehouse Rent History & Outlook
By Port Location and Region Rent Outlook Over Next 12 Months

Port Location Region Port Location Rent Outlook

8% $9.00 Eastern U.S.
Eastern U.S. Midwest Up
Great Lakes Northeast Great Lakes Same
Phoenix Los Angeles
Gulf Coast South Gulf Coast
2.1M
Atlanta Inland West Inland
7% 5.4M West Coast $8.00 West Coast
No port No port
Kansas City Chicago New Jersey-Northern
2.3M 5.4M
$7.00
6% Memphis Inland Empire
Houston

Average Warehouse/Distribution Rent 2017 Q4

1.8M Dallas-Ft. Worth New Jersey-Central
0.1M 9.4M Houston
Indianapolis Phoenix
Silicon Valley $6.00
Median Philadelphia 3.4M
5% 0.1M
1.7M
Cleveland
Minneapolis-St. Paul
Vacancy Rate 2017 Q4

0.5M
1.0M
Milwaukee Inland Empire $5.00 Detroit
New Jersey- Chicago Median
0.7M 3.4M
Northern
4% -0.2M Columbus Philadelphia
Cincinnati
2.9M Kansas City
0.6M Dallas-Ft. Worth
$4.00
Milwaukee
Cincinnati
Cleveland Atlanta
3%
New Jersey-Central Detroit Indianapolis
2.8M 4.7M $3.00 Columbus

Memphis
2%
$2.00

Los Angeles
1% 1.4M
$1.00

0% Median
$0.00 Median
0M 1M 2M 3M 4M 5M 6M 7M 8M 9M 10M
-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 22.0%
2017 Q4 Absorption (SF) YOY Change in Warehouse/Distribution Rent (since 2016 Q 4)

Source: Colliers Q4 2017 Industrial Survey Source: Colliers Q4 2017 Industrial survey

Vacancy vs. YOY Change in Vacancy Absorption vs. New Supply by Port Location
By Port Location and Region Absorption Outlook Over Next 12 Months

11.0% 10.0M
Port Location Port Location
Eastern U.S. Eastern U.S.
10.0%
Great Lakes 9.0M Great Lakes Dallas-Ft. Worth, TX
Gulf Coast Gulf Coast
9.0% Inland Inland
West Coast 8.0M West Coast
No port No port
8.0%
7.0M
Vacancy Outlook Absorption Outlook
(Over Next 12 Months)
Phoenix Atlanta Chicago (Over Next 12 Months)
7.0% Positive
Up
6.0M Close to zero
Same Kansas City
Memphis
6.0% Down Dallas-Ft. Worth
Atlanta, GA Chicago
2017 Q4 Absorption (SF)

5.0M
Vacancy Rate 2017 Q4

Minneapolis-St. Paul Houston

Indianapolis Median
5.0% New Jersey-Northern Detroit
Philadelphia
4.0M
Inland Empire Indianapolis
4.0%
Cincinnati Cleveland Milwaukee
Columbus 3.0M Inland Empire
Columbus
New Jersey-Central
3.0%
Memphis Median
New Jersey-Central Detroit 2.0M
Kansas City, MO-KS
Phoenix
2.0% Philadelphia
Los Angeles
1.0M Milwaukee
Minneapolis-St. Paul
1.0% Los Angeles Cleveland
Cincinnati
0.0M
Silicon Valley Houston
0.0% New Jersey-Northern
-1.0M

-1.0%

-2.0M

-2.0% Median
Median
-10M -5M 0.0M 6.0M 10.0M 15.0M 20.0M 25.0M 30.0M
-2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5%
YOY Change in Vacancy (since 2016 Q 4) YTD 2017 New Supply (SF)

Source: Colliers Q4 2017 Industrial Survey Source: Colliers Q4 2017 Industrial Survey

7 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Inventory, New Supply, Under Construction
INVENTORY TOTAL NEW SUPPLY
MARKET TOTAL UNDER CONSTRUCTION (SF)
DEC 31, 2017 (SF) 2017 (SF)

NORTHEAST
Baltimore, MD 231,868,331 2,322,226 6,553,709
Boston, MA 147,979,548 226,200 1,250,000
Hartford, CT 107,354,170 644,000 0
New Hampshire 61,908,706 240,000 240,000
New York City Metro 810,277,305 8,590,637 17,236,200
> Central New Jersey 318,717,255 6,224,865 9,713,875
> Long Island 132,367,416 53,052 123,774
> Northern New Jersey 359,192,634 2,312,720 7,398,551
Philadelphia-Lehigh Valley, PA 448,179,489 8,000,389 5,485,0108
Pittsburgh, PA 145,400,562 451,995 169,500
Washington, D.C. 196,832,010 2,971,006 1,229,171
Northeast Total 2,149,800,121 23,446,453 32,163,590
SOUTH
Atlanta, GA 689,594,885 18,044,430 21,481,026
Augusta-Aiken, GA 9,833,230 200,000 40,000
Austin, TX 46,077,284 670,885 292,339
Birmingham, AL 115,023,251 0 0
Charleston, SC 48,634,745 1,838,883 3,007,622
Charlotte, NC 191,907,402 2,949,745 3,706,182
Columbia, SC 67,272,474 964,050 1,060,056
Dallas-Fort Worth, TX 800,289,328 27,592,703 19,765,767
Florence-Myrtle Beach, SC 35,966,391 122,270 0
Greenville-Spartanburg-Anderson, SC 193,456,554 2,504,995 5,343,417
Houston, TX 549,843,737 8,450,251 6,375,868
Huntsville, AL 46,679,825 0 0
Jacksonville, FL 128,516,569 1,736,024 628,405
Little Rock, AR 46,497,775 0 333,760
Memphis, TN 239,750,402 3,167,531 4,308,984
Nashville, TN 197,374,192 7,585,550 1,905,000
Norfolk, VA 81,490,184 679,985 0
Orlando, FL 141,382,948 1,696,545 2,024,166
Raleigh-Durham, NC 73,966,405 394,000 879,080
Richmond, VA 97,574,458 153,480 0
Savannah, GA 65,186,368 5,756,805 5,078,792
Shenandoah Valley-I-81 Corridor 91,975,618 1,500,400 2,005,273
South Florida 359,979,758 3,565,265 2,923,026
> Fort Lauderdale 105,926,276 423,255 1,133,635
> Miami 203,070,217 2,692,843 1,595,171
> Palm Beach 50,983,265 449,167 194,220
Tampa Bay, FL 210,860,407 2,356,233 3,029,136
South Total 17,858,628,501 91,930,030 84,187,899
Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.

8 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Inventory, New Supply, Under Construction (continued)

INVENTORY TOTAL NEW SUPPLY

MARKET TOTAL UNDER CONSTRUCTION (SF)
DEC 31, 2017 (SF) 2017 (SF)

MIDWEST
Chicago, IL 1,377,282,749 24,841,444 9,226,216
Cincinnati, OH 257,725,642 3,517,068 4,503,628
Cleveland, OH 396,815,874 1,630,295 3,696,954
Columbus, OH 236,404,024 4,118,824 3,535,825
Dayton, OH 105,050,619 1,693,200 1,089,160
Detroit, MI 723,407,858 5,352,118 7,012,634
Grand Rapids, MI 116,992,615 1,504,949 1,206,350
Indianapolis, IN 245,905,362 8,483,118 5,473,128
Kansas City, MO 253,090,974 7,541,069 4,462,905
Milwaukee, WI 269,612,111 938,164 1,477,126
Minneapolis-St. Paul, MN 251,839,088 3,354,482 2,511,204
Omaha, NE 69,083,789 1,110,536 726,362
St. Louis, MO 235,722,932 4,005,682 2,308,440
Midwest Total 4,538,933,6373 68,090,949 47,229,932
WEST
Albuquerque, NM 39,550,979 0 0
Bakersfield, CA 35,148,646 490,480 0
Boise, ID 46,546,741 263,500 0
Denver, CO 232,539,679 4,501,193 4,017,394
Fresno, CA 47,833,372 96,422 0
Greater Los Angeles, CA 1,589,570,300 29,230,258 25,851,600
> Inland Empire 503,164,500 21,962,100 20,188,600
> Los Angeles 893,334,600 6,652,758 4,699,900
> Orange County 193,071,200 615,400 963,100
Honolulu, HI 40,295,277 0 95,881
Las Vegas, NV 129,911,396 6,624,030 2,906,903
Phoenix, AZ 279,215,459 5,425,982 5,677,869
Sacramento, CA 147,606,100 1,554,789 975,920
San Diego, CA 189,057,028 768,677 2,811,454
San Francisco Bay Area, CA 384,939,071 3,196,451 1,193,678
> East Bay 37,701,351 648,806 128,622
> Fairfield, CA 50,448,484 1,301,117 422,417
> San Francisco Peninsula 39,318,921 0 0
> Silicon Valley 257,470,315 1,246,528 642,639
Seattle-Puget Sound, WA 272,282,632 3,471,752 4,791,527
Stockton, CA 105,883,721 3,864,295 7,653,996
West Total 3,540,380,4019 59,487,829 55,976,222
U.S. TOTAL 14,758,248,349 242,955,261 219,557,643

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.

9 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Absorption, Vacancy
ABSORPTION YTD VACANCY RATE VACANCY RATE
MARKET
2017 (SF) ABSORPTION SEP 30, 2017 DEC 31, 2017

NORTHEAST
Baltimore, MD -31,995 4,342,276 7.0% 7.2%
Boston, MA 406,419 2,984,231 9.7% 9.3%
Hartford, CT 1,173,433 4,278,240 5.2% 5.5%
New Hampshire -430,588 1,103,330 6.4% 7.3%
New York City Metro 3,333,418 11,071,580 4.1% 3.7%
> Central New Jersey 2,772,112 7,939,427 3.8% 3.0%
> Long Island 736,149 549,660 3.8% 3.3%
> Northern New Jersey -174,843 2,582,493 4.5% 4.5%
Philadelphia-Lehigh Valley, PA 3,055,226 14,005,079 5.6% 5.3%
Pittsburgh, PA -439,931 -94,449 5.7% 6.3%
Washington, D.C. 658,794 2,028,352 10.4% 8.3%
Northeast Total 7,724,776 39,718,639 5.9% 5.6%
SOUTH
Atlanta, GA 5,419,668 22,631,141 7.4% 6.9%
Augusta-Aiken, GA 118,913 -89,043 15.9% 14.7%
Austin, TX 152,461 -248,988 6.8% 6.6%
Birmingham, AL 229,029 711,865 6.5% 6.3%
Charleston, SC -342,249 -13,352 7.0% 8.3%
Charlotte, NC 595,699 3,609,799 5.3% 5.6%
Columbia, SC 163,710 1,300,199 9.8% 9.8%
Dallas-Fort Worth, TX 9,419,556 23,257,877 6.2% 5.9%
Florence-Myrtle Beach, SC 56,492 -1,844,383 13.8% 13.7%
Greenville-Spartanburg-Anderson, SC 823,212 3,613,218 6.8% 7.0%
Houston, TX 130,352 6,753,554 5.3% 5.4%
Huntsville, AL 341,584 642,582 5.5% 5.4%
Jacksonville, FL 2,214,024 3,129,633 4.6% 3.8%
Little Rock, AR 0 520,248 10.3% 10.3%
Memphis, TN 1,848,886 4,465,012 6.8% 6.1%
Nashville, TN 1,805,965 2,439,285 4.2% 4.6%
Norfolk, VA -79,724 1,650,790 4.6% 4.1%
Orlando, FL 998,668 2,541,126 5.3% 4.5%
Raleigh-Durham, NC -19,880 659,229 6.1% 6.5%
Richmond, VA 114,664 1,481,101 4.6% 3.5%
Savannah, GA 1,544,837 5,643,681 2.0% 3.4%
Shenandoah Valley-I-81 Corridor 1,341,273 2,142,200 6.6% 7.0%
South Florida 832,599 3,166,405 4.1% 3.9%
> Fort Lauderdale 438,363 1,275,943 4.0% 3.8%
> Miami 207,098 940,890 4.4% 4.3%
> Palm Beach 187,138 949,572 3.1% 2.8%
Tampa Bay, FL 1,239,929 3,189,044 5.7% 5.4%
South Total 28,949,668 91,352,223 6.0% 5.8%
Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.

10 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Absorption, Vacancy (continued)

ABSORPTION YTD VACANCY RATE VACANCY RATE

MARKET
2017 (SF) ABSORPTION SEP 30, 2017 DEC 31, 2017

MIDWEST
Chicago, IL 5,437,050 18,900,455 6.9% 6.8%
Cincinnati, OH 630,941 5,094,700 4.0% 4.2%
Cleveland, OH 504,917 2,266,394 4.5% 4.4%
Columbus, OH 2,940,388 4,377,440 5.1% 4.2%
Dayton, OH -151,059 1,447,662 5.7% 6.0%
Detroit, MI 4,724,023 4,421,502 3.2% 3.0%
Grand Rapids, MI 203,636 2,446,986 5.1% 4.9%
Indianapolis, IN 3,436,493 7,785,044 5.6% 5.6%
Kansas City, MO 2,259,431 8,854,720 5.9% 6.4%
Milwaukee, WI 663,177 1,924,038 3.8% 4.4%
Minneapolis-St. Paul, MN 1,039,197 3,369,674 5.0% 4.8%
Omaha, NE 455,995 1,134,752 3.6% 3.4%
St. Louis, MO 413,789 3,873,871 6.4% 6.7%
Midwest Total 22,557,978 65,897,238 5.2% 5.2%
WEST
Albuquerque, NM 54,765 192,925 5.0% 5.0%
Bakersfield, CA 1,992 -32,515 4.3% 5.6%
Boise, ID -123,754 95,579 2.5% 2.7%
Denver, CO 1,347,354 3,636,891 4.7% 4.6%
Fresno, CA -176,805 315,737 4.5% 5.0%
Greater Los Angeles, CA 4,419,700 21,798,400 2.1% 2.5%
> Inland Empire 3,433,900 18,260,100 3.4% 4.4%
> Los Angeles 1,352,500 4,524,400 1.3% 1.4%
> Orange County -366,700 -986,100 2.7% 2.6%
Honolulu, HI -38,942 -148,422 1.9% 2.0%
Las Vegas, NV 2,193,582 7,821,356 5.1% 4.5%
Phoenix, AZ 2,096,139 9,054,463 8.2% 7.8%
Sacramento, CA 1,882,289 4,500,324 6.7% 6.1%
San Diego, CA 592,245 2,056,566 4.5% 4.2%
San Francisco Bay Area, CA 162,135 2,382,144 5.0% 4.9%
> East Bay -17,768 261,734 4.3% 4.4%
> Fairfield, CA -43,214 1,694,443 6.2% 6.4%
> San Francisco Peninsula 144,091 153,825 1.6% 1.1%
> Silicon Valley 79,026 272,142 5.4% 5.2%
Seattle-Puget Sound, WA -642,910 894,541 2.8% 2.9%
Stockton, CA 1,028,172 4,849,635 4.5% 4.8%
West Total 12,795,962 57,417,624 3.7% 3.8%
U.S. TOTAL 72,028,384 254,385,724 5.2% 5.1%

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals.

11 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Average Asking NNN Rents as of Q4 2017
WAREHOUSE /
MANUFACTURING SPACE FLEX / SERVICE SPACE
MARKET DISTRIBUTION SPACE
(USD/SF/YR) (USD/SF/YR)
(USD/SF/YR)

NORTHEAST
Baltimore, MD $3.84 $10.06 $5.25
Boston, MA $7.81 $9.64 $6.56
Hartford, CT $4.61 $7.00 $4.56
New Hampshire $5.96 $8.26 $6.36
New York City Metro $7.11 $11.99 $7.79
> Central New Jersey $7.20 $12.91 $6.77
> Long Island $13.37 $12.40 $9.80
> Northern New Jersey $6.44 $10.30 $7.81
Philadelphia-Lehigh Valley, PA $4.06 $9.07 $4.98
Pittsburgh, PA $4.14 $11.60 $5.08
Washington, D.C. $7.65 $12.52 $7.78
Northeast Total $5.58 $10.85 $6.30
SOUTH
Atlanta, GA $3.25 $9.22 $3.94
Augusta-Aiken, GA $1.47 $3.25
Austin, TX $12.17 $9.04
Birmingham, AL $4.83 $7.33 $5.76
Charleston, SC $4.77 $7.79 $5.04
Charlotte, NC $3.72 $9.43 $4.98
Columbia, SC $3.01 $9.07 $3.53
Dallas-Fort Worth, TX $4.95 $9.60 $4.41
Florence-Myrtle Beach, SC $2.13 $7.31 $2.68
Greenville-Spartanburg-Anderson, SC $4.40 $7.80 $3.72
Houston, TX $10.33 $6.56
Huntsville, AL $6.88 $4.87
Jacksonville, FL $9.64 $4.34
Little Rock, AR $3.99 $3.34
Memphis, TN $6.41 $2.87
Nashville, TN $4.95 $10.20 $5.54
Norfolk, VA $5.80 $12.37 $4.53
Orlando, FL $10.12 $5.84
Raleigh-Durham, NC $13.90 $5.56
Richmond, VA $4.42 $9.85 $4.19
Savannah, GA $3.18 $6.50 $4.11
Shenandoah Valley-I-81 Corridor $4.41 $5.31 $3.82
South Florida $9.11 $17.21 $11.10
> Fort Lauderdale $6.91 $13.35 $8.44
> Miami $11.99 $22.35 $12.25
> Palm Beach $8.23 $14.66 $9.06
Tampa Bay, FL $9.74 $4.94
South Total $4.02 $10.06 $4.94
Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals. * Straight averages used

12 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

 United States | Industrial Survey | Average Asking NNN Rents as of Q4 2017 (continued)

WAREHOUSE /
MANUFACTURING SPACE FLEX / SERVICE SPACE
MARKET DISTRIBUTION SPACE
(USD/SF/YR) (USD/SF/YR)
(USD/SF/YR)

MIDWEST
Chicago, IL $5.13
Cincinnati, OH $3.05 $6.28 $4.02
Cleveland, OH $3.24 $6.96 $3.90
Columbus, OH $6.42 $3.28
Dayton, OH $2.40 $4.53 $3.42
Detroit, MI $8.87 $5.32
Grand Rapids, MI $3.67 $3.86 $3.97
Indianapolis, IN $5.82 $6.66 $3.59
Kansas City, MO $4.27 $8.81 $4.54
Milwaukee, WI $3.81 $6.04 $4.17
Minneapolis-St. Paul, MN $4.93 $5.04 $4.69
Omaha, NE $5.88 $4.98
St. Louis, MO $4.37 $7.51 $4.42
Midwest Total $3.99 $6.90 $4.68
WEST
Albuquerque, NM $7.74 $9.14 $7.20
Bakersfield, CA $8.72 $5.88
Boise, ID $6.58
Denver, CO $9.64 $11.96 $7.90
Fresno, CA $9.64 $11.96 $7.90
Greater Los Angeles, CA $3.37 $9.15 $4.53
> Inland Empire $8.01
> Los Angeles $7.00
> Orange County $8.87
Honolulu, HI $10.40
Las Vegas, NV $15.68
Phoenix, AZ $9.30 $10.44 $7.00
Sacramento, CA $7.92 $12.53 $6.36
San Diego, CA $5.49 $9.02 $4.96
San Francisco Bay Area, CA $11.20 $20.62 $10.32
> East Bay $11.56 $24.40 $7.45
> Fairfield, CA $11.09 $13.30 $5.24
> San Francisco Peninsula $8.39 $9.82 $5.54
> Silicon Valley $18.78
Seattle-Puget Sound, WA $13.64 $24.57 $11.54
Stockton, CA $7.57 $15.75 $8.02
West Total $9.46 $18.82 $7.34
U.S. TOTAL $5.44 $11.93 $5.41

Note: The detail for markets with older data has been removed, but the numbers they contribute remain in the totals. * Straight averages used

13 U.S. Research Report | Q4 2017 | Industrial Market Outlook | Colliers International

 INDUSTRIAL SERVICES CONTACT
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National Director, Industrial | USA
+1 317 713 2107
pete.quinn@colliers.com

RESEARCH CONTACTS
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National Director of Industrial Research | USA
+1 602 222 5184
james.breeze@colliers.com
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Director of Research | Global
+1 212 716 3689
pete.culliney@colliers.com

CONTRIBUTORS
Andrew Nelson
Chief Economist | USA
Jeff Simonson
U.S. Senior Research Analyst | USA
AJ Paniagua
U.S. Research Analyst | USA

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