Demand for logistics space remains strong across the globe

Global logistics markets have maintained their momentum from the start of 2018, with robust demand holding vacancy levels near historic lows despite a growing supply pipeline. With strong pre-leasing trends for newly delivered stock, the ongoing competition for high quality space will add pressure on rents globally through the rest of 2018.

U.S. industrial vacancy remains stable despite robust development pipeline

The U.S. industrial market rebounded in the second quarter, with strong growth in net absorption and over 6% annual growth in rents. Vacancy rates remained stable, continuing at historic sub-5.0% levels, supported by strong pre-leasing trends in new space. Despite deliveries being up 28% year-on-year, vacancy has continued to decline. Top logistics markets are operating at sub-3.0% vacancy rates and competition will persist for quality space, adding pressure on rents in 2018.

European warehousing markets on path to new records in 2018

The European warehousing market is expected to carry its momentum into the second half of the year, largely driven by the same combination of economic growth and structural change seen in the past two to three years.

The construction pipeline remains at record levels despite difficulties in obtaining suitable land. There are no signs that new development activity will slow significantly, although the majority of this new-build stock will be built-to-suit. Overall, we remain optimistic that occupier activity in 2018 will be in line with or even slightly higher than 2017’s record volumes. Unsurprisingly, considering healthy demand and a tight supply situation, rental growth continued to accelerate over the second quarter, a trend that we expect to continue.

New supply continues to be met by strong demand in Asia Pacific

Rents crept up further in most Asia Pacific logistics markets in the second quarter. Notable growth was seen in Beijing and Shanghai, where rents rose at their highest annual pace in four years, while a shortage of workers also boosted demand for modern logistics space in Tokyo. In Hong Kong, rents edged down amid weakened trading performance and tenant relocation activity.

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