Strong tenant expansion continued in the first quarter as developers were underway on a historic volume of new projects while the pace of rent increases downshifted slightly.  Net absorption totaled 73,987,060 SF in the first quarter, bringing the aggregate for the last four quarters since the lockdown to 252.3 million SF the most since 2017.  Vacancy is projected to remain between 5% and 6%, roughly half of the level reached following the global financial crisis.  Despite the uncertainty over the strength of an economic recovery that is expected to start later this year, a wide range of companies are investing heavily in their logistics networks as they plan for post-Covid growth.

After taking a hiatus in the first half of last year, construction starts currently total nearly 330 million SF.  The skyrocketing Q1 development activity follows a flat first half and a second half in which 160 million SF broke ground.  Investor interest in industrial’s stability and outlook dampened somewhat.  The $93 billion in 2020 transaction activity was 20% less than 2019.  After enjoying nine years of rent growth in excess of 4% the pace downshifted to 3.2% last year as rising completions and vacancy hindered growth. But the national total masks variations across markets and submarkets. Worchester, Massachusetts; Grand Rapids, Michigan; Nashville, Philadelphia, Sacramento and Salt Lake City rank among the strong rent growth markets. Meanwhile, rent growth has slowed the most in Pittsburgh, Minneapolis, Sandusky, Ohio; Rockford, Illinois; and Houston, where the 12-month average fell 0.9%. READ MORE >


Tenants shed a record amount of office space in the first quarter as many companies continued to assess their post-Covid operational needs in an economy that is expected to rebound this year.  First-quarter negative net absorption nationwide totaled 54.4 million SF, equal to 0.7% of the 8.4-billion-SF inventory.   In the three quarters following last year’s lockdown there was a retreat of 76 million SF, more than erasing the 44.3 million SF of tenant growth in 2019.

Heading into the recession the office market was enjoying strong fundamentals in terms of vacancy, restrained levels of supply, leasing activity and demand, with 40 straight quarters of growth.  After a slow January there had been hopes the leasing market, buoyed by vaccine optimism, might show signs of a rebound. But February’s deal velocity was 10% less than the monthly average since April.

Demand has fallen across the country.  In Q1, only 17 of the leading 80 metros reported growth as Hickory, North Carolina, topped all markets with 279,973 SF of net absorption over the last 12 months.  Although other major markets such as Dallas, Philadelphia, New York and Los Angeles have been punished, none has suffered like San Francisco.  Many of its prominent tech tenants are experimenting with permanent remote work while others have relocated to more affordable climes. Rents in San Francisco have fallen 9% year over year.  Adding to the weakness is the jump in sublet space, which totals nearly 200 million SF, up 60% since the lockdown. READ MORE >


After being slammed by the pandemic in 2020, the retail property sector improved in the first quarter with a surge in demand by grocers, pharmacies, discounters and general merchandisers for freestanding single-tenant buildings. Meanwhile, merchants in malls and power centers continued to shed space.

First-quarter overall net absorption totaled 4.5 million SF of space, a reversal from the negative 25.9 million SF recorded in 2020 and more than twice the 12 million SF vacated in the global financial crisis. But the relatively contained supply has cushioned the impact on vacancy. Even though projections forecast 50 million SF will be vacated in 2021, vacancy still will be lower than the last recession.

The weakening in fundamentals is neither uniform across property subtype nor market.  Malls already have witnessed the most distinct rise in vacancy, up 220 basis points year over year. The 901,710,162 SF in mall space continues as the most vulnerable with projections that vacancies could rise from 140 to 240 basis points.  But there was 7.2 million SF of Q1 tenant growth in general retail space, which typically consists of stand-alone buildings with surface parking. This building type represents about half of all 11.6 billion SF of retail space. After tenants in neighborhood centers shed 18.3 million SF of space last year, that category nearly produced a Q1gain.  There was 786,383 SF of Q1 tenant expansion in strip centers, a turnaround from the 2.6 million SF of negative net growth in 2020. READ MORE >


The nation’s apartment market is slowly recovering from Covid’s disruptions as an improved outlook, pent-up demand and discounts have more people than ever looking for new flats. reports that overall search activity hit a record in February, with clicks up nearly 50% versus a year ago.  Additionally, strong investor demand for multifamily properties particularly in the Sunbelt spiked in Q1as buyers poured nearly $6 billion into the sector. This is in line with pre-Covid averages as downtown and suburban assets posted above-average gains in Q1.  One-bedroom rents rose about 40 basis points and are 20 basis points above Q1 gains in 2017, 2018 and 2019.  Full-year rent growth will approach 5% if the trend continues.

Demand in the past 12 months decidedly has tilted toward Sun Belt locations with Charleston, S.C., posting 8% tenant growth and topping all markets greater than 50,000 units.  Salt Lake City, Jacksonville, Fla., Charlotte, Richmond, San Antonio, Miami and Raleigh all posted at least 4% demand increases last year. Last year’s strong second-half demand for suburban apartments is easing slightly. Lately tenant activity is shifting marginally toward downtown areas, where one survey shows 60% of landlords are offering reduced rents and other concessions aimed at reducing vacancies from the peak of last summer.  Nevertheless, because of demand patterns and growth trends, developers still are focused on suburban locations rather than the urban infill sites so popular in the last decade. READ MORE >