Industrial Real Estate - Leasing Market Indicators
So where is the industrial tenant demand and leasing demand headed? Have we bottomed? In I ndustrial Income , thanks to the insight of Graham Wahlberg of Goodman , I reviewed the best leading and real time indicators that signal tenant leasing demand. Here I show them going back two quarters as well as pre-pandemic as these are the two most useful time horizons to measure to glean insight.
E-commerce retail sales reverted back to the mean growth rate and then slowed a touch in Q3 2024. Meanwhile, rail freight intermodal traffic's one year growth trend wavered even if still positive. Now did it trend up because of the Panama Canal stoppage? Is that transitory? Warehouse and Storage employment ticked up in January. But why? Usually there are more layoffs after peak.
These mixed signals must go into the context of what we are seeing on the ground, which is cautious decision making in the c-suite, softness mostly concentrated in the 100,000-300,000 SF size segment, Amazon back in the market as e-commerce continues to grow, and increased near shoring.
What do I take out of that? With the cheap money out of the market, today's market focus is on consolidation and efficiency.
Leading Indicator - E-Commerce Retail Sales
January 2019 to Present
Real Time Indicator - Rail Freight Intermodal Traffic
January 2019 to Present
Employment Warehousing & Storage, Transportation and Warehousing
January 2019 to Present
2024 Commercial Real Estate Brokerage Firm Trends
CRE Analyst is the premier training grounds for analyst's looking to get into the institutional commercial real estate business. They do an exceptional job of tracking timely movements in the markets and providing analysis of firms, asset classes and capital flows. A summary of all of the publicly traded commercial real estate firms earnings calls common themes are as follows:
* Cost Cutting Slows: Brokerages streamlined operations after a slow 2023, positioning themselves for potential rebound. * Margins Showing Improvement: Profit margins, previously in decline, saw a rebound in the fourth quarter of 2023. * Leasing Stabilizes: Leasing commissions steadied in late 2023, with hints of mild improvement in the fourth quarter. * Capital Markets Remain Stalled: Activity in capital markets continues to be sluggish, with sharp declines compared to previous years and peak periods. * Focus on Low-Margin Growth: Property and facilities management are key drivers of growth for big firms, underscored by CBRE's major acquisition in that sector.
2024 Logistics Trends
Supply Chain Drive had an excellent article that summarizes the current state of the market for third party logistics operators and the Southern California ports. 3PL's are consolidating, shuffling accounts, and focused on efficiency. * Shifting Focus: Logistics companies are prioritizing efficiency within their supply chains, leading to job cuts and facility closures in the warehousing sector. * Falling Numbers: Warehousing and storage employment in the U.S. dropped to 1.85 million in December 2023. * Impact Across Industries: Retail brands, e-commerce players, and third-party logistics providers have all announced job cuts and facility closures, affecting over 2,800 employees so far in 2024. * Efficiency Measures: Businesses are looking to streamline operations by: + Consolidating warehouses into newer facilities with advanced technology and infrastructure. + Utilizing store-based fulfillment or opening micro-fulfillment centers instead of relying on large warehouses. * Cargo Boom: The Port of Long Beach experienced a significant increase in cargo volumes in January 2024, exceeding expectations. * Year-Over-Year Growth: Compared to January 2023, cargo volumes jumped by 18%. * Import Surge: Imports saw an even sharper rise, with a 24% increase year-over-year. * Retailer Inventory Building: The surge is attributed to retailers stocking up on inventory ahead of the Lunar New Year. * Market Share Recapture: The Port of Long Beach is aiming to regain market share lost to other ports in 2023.
What does this environment mean to your business and property? This is where we love to play and collaborate. You'll find us hyper responsive, focused on accountability, and well resourced to achieve results. What are the chances that we can help you?
Best Regards,
Justin
Justin Smith, SIOR
jbsmith@lee (mailto:jbsmith@lee-associates.com) irvine.com (mailto:jbsmith@leeirvine.com?subject=Newsletter%20Follow%20Up)
949.400.4786
Charts & visuals
