Strengthening economic fundamentals point to a continued upswing for industrial markets as e-commerce, manufacturing, technology and energy are key factors
The positive outlook for the North American industrial market continues, according to Cushman & Wakefield’s 2015-2017 Industrial Real Estate Forecast. Key sectors like e-commerce, manufacturing, technology and energy are fueling progress across the board.
According to Maria T. Sicola, who heads the commercial real estate services firm’s Research for the Americas group, strengthening fundamentals throughout North America support a positive forecast for the next three years.
United States
Job growth is poised to top three million in 2015, a sure sign that the economy is on the upswing and, with it, the industrial market. According to the report, trends in industrial supply and demand are favorable across all major and secondary markets.
Activity in the major markets the strongest, specifically in California’s Inland Empire, Chicago, Dallas/Fort Worth, Houston and Central New Jersey.
Warehouse/Distribution
E-commerce is fueling new projects in major logistics hubs such as Dallas/Fort Worth, the Inland Empire, Chicago and Atlanta. Retailers are now utilizing distribution centers for fulfillment as well. And instead of fulfilling web orders from hundreds of miles away, retailers like Walmart, Best Buy and Gap are routing orders to nearby outlets.
Trucks remain the primary shipping method, but rail is rapidly emerging as an alternative. Markets with intermodal capabilities, notably Dallas/Fort Worth, Atlanta and Chicago are leading the way in growth and construction.
Manufacturing
U.S. manufacturing activity is on the rise and expected to post steady increases. Less expensive energy at home and rising labor costs abroad have resulted in bringing manufacturing back home. As a result, 38.8 million square feet of manufacturing space was leased in 2014, and large build-to-suit projects are currently underway in Atlanta, Denver and Chicago. With manufacturers responding more quickly to local market demands, regional manufacturing will increasingly be seen as cost effective.
Canada
The country’s industrial market in 2014 was driven by increased U.S. demand for Canadian goods and a more competitive dollar. Energy has been a mixed bag, with lower oil prices spurring manufacturing activity in Ontario and Quebec, but forcing such oil-rich economies as Alberta, Newfoundland and Saskatchewan to recalibrate their economic outlooks.
By market, Toronto continues to see significant speculative development, notably big-box industrial. Lower energy prices and record automobile sales have fueled demand for auto parts. Montreal, Canada’s second-largest industrial market, has benefitted strongly from increased demand supported by a lower dollar and lower oil prices. Calgary, an oil-producing market, is seeing considerable speculative development, and a key driver has been logistics. Manufacturing is on the upswing in Vancouver, with U.S. demand helping increase exports by 8.3 percent year-over-year as of August 2014.
Mexico
Automotive manufacturing is driving industrial real estate in Mexico. In 2014, the country became the world’s 7th largest automaker and 4th largest exporter.
In Mexico City, e-commerce demands are driving activity. The Monterrey market is experiencing sustained growth, notably development of high-quality, environmentally friendly industrial parks. And Queretaro, located in central Mexico’s Bajio region, is home to 36 percent of Mexico’s aerospace manufacturing, an industry that is experiencing double-digit annual growth.
Click here to download Cushman & Wakefield’s full 2015-2017 Industrial Real Estate Forecast—United States, Canada, Mexico.
