Sustained demand for logistics space keeps vacancy rates near historic lows

Global logistics markets have maintained their momentum, with record demand holding vacancy levels close to historic lows despite the continuing expansion of supply pipelines. With strong pre-leasing activity and limited speculative construction in many markets, we expect vacancy rates to remain stable and put further upward pressure on rents.

U.S. industrial rents continue upward trend

Net absorption reached the highest level for the year in the third quarter, with annual rental growth accelerating to 6.5%. For the third straight quarter, strong pre-leasing helped vacancy remain at an all-time low of 4.8% despite a 17-year high volume of new completions. With top logistics markets now operating at sub-3.0% vacancy rates, in most U.S. locations landlords should continue to enjoy favourable market conditions through the rest of the year.

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European warehousing markets remain on track for record take-up in 2018

The European logistics market continues to enjoy robust levels of occupier demand. Although activity appears to be moderating as we enter the final quarter of the year, we expect total take-up in 2018 to be in line with, or slightly higher than, 2017’s record levels. A growing proportion of this demand is by online retail fulfilment, which could account for 20% of total take-up across 2018.

New development continues apace, although this is predominantly build-to-suit rather than speculative. As a result, the overall European vacancy rate continues to hover around the 5% mark. Despite this, rental growth has remained relatively modest in major cities.

Sustained strong demand keeps supply in check in Asia Pacific

Labour shortages continue to push demand for efficient modern logistics space in both China and Japan, while 3PLs continue to expand their requirements in Hong Kong. Demand remained steady in Sydney and Melbourne. Rents edged up in most markets across the region with a sharp increase seen in Beijing as the market remains extremely tight.

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