Industrial developments under construction decreased by 12.2 msf during Q4, clocking in at 141.3 msf. This comes in slightly above the 135.4 msf registered at the end of 2006.
"There's no debating the fact that the warehouse market has weakened in step with the economy," remarked Ross Moore, senior vice president and director of market & economic research at Colliers International. "Even though the export sector continues to fire on all cylinders, the strength of the domestic economy has been shaken. As a result, businesses are reluctant to sign leases. This situation may unfortunately persist through mid-year 2008, but Colliers remains confident that the underlying economy is strong and will thus respond favorably to recent actions by the Fed and other policymakers."
In terms of absorption, Q4 absorption measured an underwhelming 26.5 msf -- just half of the 55.7 msf registered at the end of Q3. This brought year-to-date absorption to 149.2 msf -- a 14.4 percent decrease from the year-ago period, when absorption measured 174.3 msf.
In addition, many demand drivers posted downward swings during the fourth quarter of 2007. Most notably, the December ISM index came in well below the critical "50" level -- at 47.7 -- its lowest reading since April 2003. This suggests the manufacturing sector is contracting. On the plus side, the global economy is still showing robust growth, which serves to support the export sector.
All that said, rents for industrial space were marginally higher during the fourth quarter, with a 0.4 percent increase -- bringing the national average to $5.62 per square foot (psf). This marks a 6.4 percent increase from the year-ago period, as at this time last year, rents registered $5.28 psf.
Finally, 24 United States warehouse markets saw vacancies decrease, while 31 saw them go up.
