Industrial Space Still in Demand for 2012

Although 4Q2011 growth in industrial real estate demand was slightly lower than the historical normal range of 1-2 percent per year, it matches overall economic growth, which, judging by GDP, is still positive. According to the NAIOP Research Foundation’s Industrial Space Demand Forecast, 4Q2011 marks the sixth consecutive quarter of positive growth in industrial demand, following seven prior quarters of deep contractions.

According to the data, the current annualized rate of growth (4Q2011) came in at .87 percent, which is in line with the 1.0 percent forecast. This rate is consistent with the readings during the past several quarters, which have ranged from .87-1.26 percent.

Looking forward, most of the demand drivers are in the normal category, somewhat in sync with the growth in the United States and world economies. Growth that deviates too much from long- term norms is not expected in the near future. Strong demand growth isn’t expected until later in 2012, contingent upon the overall economy resuming more normalized growth and other risks, such as the continued issues in Europe.

Therefore, demand for industrial space is expected grow at an annualized rate of 1.01 percent in 1Q2012, which is at the low end of the normal range. Increasing rates of growth are expected to begin to occur by the second or third quarter of 2012, barring exogenous shocks.

“Demand for industrial is very much tied to the overall economy,” said Thomas J. Bisacquino, NAIOP president and CEO. “Although still small, it’s encouraging to see some positive growth in the industrial markets, it is evident that the industry won’t return to more normal rates of growth until the U.S. and global economies stabilize.”

The Industrial Space Demand Forecast is part of ongoing data and analysis by Dr. Randy Anderson, University of Central Florida, and Dr. Hany Guirguis, Manhattan College.

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