NAIOP forecasts industrial absorption to fall slightly from 2016 levels

By Derek Gilliam  –  Reporter, Jacksonville Business Journal

The NAIOP Research Foundation expects strong absorption in the country’s industrial real estate market in 2017.

The research paper the commercial real estate association released on Monday forecasts an average of 63.8 million square feet in absorption per quarter in 2017. The research paper notes that is slightly less absorption per quarter than in 2016 when the industrial real estate market averaged 64.2 million square feet of absorption per quarter.

“Overall, the consumer sector of the economy appears to be very healthy. It shows signs of steady improvement, although with some modulation in January 2017,” according to the research. “Hiring and wage growth remained steady from 2015 through 2016, and wealth effects from rising stock and home prices appeared to be boosting consumer spending.”

Consumer confidence in the economy reached a 15-year high in December, before falling slightly in January.

E-commerce and other warehouses providing “last mile” distribution will likely see gains regardless of location, the research notes.

However, there is a wild card, which could cause an explosion of industrial demand, but is hard for forecasters to predict.

“The wildcard that could cause significant growth in the U.S. economy and the industrial markets is expansion in the manufacturing and goods-producing sectors,” according to the research. “The new Trump Administration appears to be committed to spurring growth in these fields which have in most instances, reduced production and eliminated employees since the Great Recession that took hold in 2008.”

Despite the rosy picture painted by the research note, it does expect industrial demand to slump slightly in 2018 forecasting net absorption to reach 57 million square feet per quarter.

The note also warns against possible increases in inflation causing increases in the interest rates.

“Such impacts could dampen the ability of consumers and businesses to spend and invest reducing economic activity and therefore, demand for industrial space,” the paper reads.