Industrial Property Outperforms Other Commercial Real-Estate Sectors -- For Now

Compiled ByDeborah Austin Disciplined industrial developers and healthy consumer-goods distribution have helped industrial properties weather the tough economy even as commercial-office and retail properties showed signs of weakening. But industrial leasing activity soon could mirror today's weakened consumer spending, says a new market intelligence report from business advisory firm Grubb & Ellis Co., Northbrook, Ill. Overall, the industrial-property vacancy rate finished third-quarter 2001 at 7.71%, a quarterly rise of 0.5% -- well below the high-water vacancy rate of 13.7% reached in the first quarter of 1992. Third-quarter 2001 commercial-office vacancy reached 13.02%, up 1.5%. By industrial-product type, warehouse/distribution fared best with a 6.94% vacancy rate; general industrial/manufacturing space, 8.78%; research-and-development-flex space, 10.35%. Markets with sub-5% vacancy rates included Northern and Central New Jersey, Los Angeles, Seattle and Oakland. Those at 10% or more included San Jose, Atlanta, Pittsburgh and Cleveland. Expect industrial vacancy rates to peak between 9% and 10% by mid-2002, says the report, then begin a slow descent with returning demand and depleted construction pipelines.