Sound Fundamentals, E-Commerce and Innovation Drive Rapidly Evolving North American and European Industrial Sectors

Sound Fundamentals, E-Commerce and Innovation Drive Rapidly Evolving North American and European Industrial Sectors

PR Newswire

TORONTO, May 10, 2018

TORONTO, May 10, 2018 /PRNewswire/ --

Avison Young releases its Spring 2018 North America and Europe Industrial Market Report  

Sound fundamentals, the logistics requirements of e-commerce, and innovations in building design and utilization continue to drive the rapid evolution of the industrial property sector across North America and Europe. An undersupply of available space remains a central issue in most markets, and developers have responded with notable new construction to anticipate occupiers' growing needs. Major online players are altering the supply chain, and new technologies and innovations are determining how, where and what type of industrial product is being built. Meanwhile, the needs of big data and the cannabis industry (in some markets) are adding to an already crowded playing field. Unknown factors potentially impacting the sector - and the global economy in general - include geopolitical changes such as the renegotiation of NAFTA and the U.K.'s exit from the European Union.

These are some of the key trends noted in Avison Young's Spring 2018 North America and Europe Industrial Market Report, released today.

The report covers the industrial markets in 59 North American and European metropolitan regions: CalgaryEdmontonHalifax,LethbridgeMontrealOttawaReginaTorontoVancouverWaterloo RegionWinnipegAtlantaAustinBostonCharleston,CharlotteChicagoClevelandColumbus, OHDallasDenverDetroitFort LauderdaleGreenvilleHartford, Houston,IndianapolisJacksonville, Las VegasLong IslandLos AngelesMemphis, MiamiMinneapolisNashvilleNew Jersey,OaklandOrange CountyOrlandoPhiladelphiaPhoenixPittsburghRaleigh-DurhamRenoSacramentoSan AntonioSan Diego CountySan FranciscoSan Jose/Silicon ValleySan MateoSt. LouisTampaWashingtonDCWest Palm BeachMexico CityCoventryU.K.LondonU.K.ManchesterU.K.; and BucharestRomania.

"Today, I am pleased to share with you Avison Young's insights into the robust industrial market - the commercial real estate sector's hottest asset class," comments Mark E. Rose, Chair and CEO of Avison Young. "These insights are drawn from our annual industrial survey, spanning 59 markets across five countries and two continents, with a combined industrial stock of more than 14 billion square feet (bsf)."     

He continues: "The push to find cost-effective solutions for same-day or next-day delivery to consumers is continuously challenging the retail sector - and, by association, the industrial sector, which frankly are becoming more intermingled than ever before. Although e-commerce sales make up only a small, but rapidly growing, fraction of overall retail sales, stakeholders looking to service the retail sector are thinking long-term. Strong demand is reflected in declining vacancy rates which, by the way, are at or approaching historic lows in many markets and countries, leading to rising rental rates for industrial space. This situation has increased asset values - a fact that has made industrial assets hot commodities among investors and users as well as occupiers."

"Confidence in the long-term viability of the industrial sector and e-commerce has recently been demonstrated not only by the sheer leasing velocity and demand for space, but also by some notable M&A activity, such as the all-cash transaction valued at C$3.8 billion, including debt, between Blackstone and PIRET earlier this year in Canada, as well as a recently announced merger agreement in which Prologis will acquire DCT and its 71 million square feet (msf) of real estate in a US$8.4-billion stock transaction, including the assumption of debt, in the U.S.," says Rose.

According to the report, of the 59 industrial markets surveyed by Avison Young across North America and Europe, vacancy declined in 38 markets, remained unchanged in three, and increased in 18 during the 12-month period ending March 31, 2018.

The analysis also revealed that, with demand in most markets outpacing new supply, the development of new product has escalated. Nearly 235 msf was completed across all markets surveyed by Avison Young in the 12 months ending with the first quarter of 2018 - an increase of more than 5 msf compared with the prior 12-month period. Meanwhile, the amount of space under construction increased more sharply, jumping more than 13 msf year-over-year to nearly 234 msf.

CANADA  
Survey results of 11 Canadian industrial markets, which comprise more than 2 bsf, revealed a record-low national industrial vacancy rate of 3.3% in the first quarter of 2018 - down 40 basis points (bps) year-over-year. Trends from 2017 prevailed in the first quarter of 2018 with insatiable demand outpacing new supply and driving rents higher. Consequently, industrial assets are highly sought-after by investors.

"Canada's industrial market is performing well beyond expectations, and although absorption levels vary from city to city, the industrial market's increasingly strong link to the retail sector - specifically e-commerce - remains a key catalyst for growth," says Bill Argeropoulos, Principal and Practice Leader, Research (Canada) for Avison Young. "As a result, large-format distribution/fulfilment centre space is desirable, but scarce. Meanwhile, the overall industrial sector remains challenged by rising land costs, including soaring development charges, and dwindling supply of developable land in some markets."

Argeropoulos continues: "The sector's encroachment on urban centres - to shorten last-mile delivery - and associated high costs may prompt landlords in Canada to follow the trend seen elsewhere and build multi-storey facilities that better fit into tighter infill markets. Innovative developers will ultimately transform the supply chain by thinking outside of the traditional warehouse box as stakeholders aim to future-proof their assets."

Notable First-Quarter 2018 Canadian Industrial Market Highlights:  

Argeropoulos adds: "The U.S. administration's desire to revamp NAFTA and introduce protectionist trade policies has the potential to create headwinds for Canada's industrial market and the economy in general. For now, the industrial market is expected to operate at or near capacity until new supply catches up with demand."

U.S.  
Market conditions in the U.S. were again landlord-favourable during the 12-month period ending March 31, 2018. The 12-bsf U.S. industrial market ended the first quarter with an impressive 5% vacancy rate overall, a decrease of 30 bps year-over-year, even while a significant amount of new construction was delivered. E-commerce and last-mile distribution hubs near population centres, data centres and bio-tech facilities continue to be prevailing demand generators and have had a meaningful impact on industrial vacancy.

"Developers are seeking to meet strong tenant demand by creating the most efficient product possible through innovation and technology," states Earl Webb, Avison Young's President, U.S. Operations. "Land constraints have supported innovative construction, such as multi-storey development, and technology solutions in supply and distribution logistics. E-commerce and consumer demand for ever-shorter delivery windows as well as ever-growing data-centre requirements have strained industrial markets in the country's population centres."

"The industrial sector continues to be a darling asset class in the capital markets," adds Erik Foster, Avison Young Principal and Practice Leader of the firm's industrial capital markets group. "Because of the solid leasing fundamentals, low vacancies and a lack of available institutional-quality product in most major markets, capital spending in the development space is one of the primary means for investors to gain equitable returns given the certainty of lease-up."

Notable First-Quarter 2018 U.S. Industrial Market Highlights:  

Webb concludes: "The U.S. market has experienced a healthy tightening over the last several years, though it must be noted that the rate of improvement has slowed as the overall average reached low single digits. Supply-chain logistics, technology and the availability of affordable power - in the form of electricity or other energy sources - will be key contributors to the long-term health of the industrial sector."

Please turn to the following pages of the report for local market highlights. For comments on individual markets, please contact the Avison Young representatives listed below. Thank you.  

pp.4-5 Canada & U.S.:    
Bill Argeropoulos, Principal and Practice Leader, Research (Canada), 416.673.4029 or 416.906.3072 (cell) bill.argeropoulos@avisonyoung.com    
Margaret Donkerbrook, Principal and Practice Leader, U.S. Research, 202.644.8677 margaret.donkerbrook@avisonyoung.com

Canada
p.13 Calgary                                                                                                                            
Todd Throndson, Principal and Managing Director, 403.232.4343 todd.throndson@avisonyoung.com

p.14 Edmonton                                                                                                                        
Cory Wosnack, Principal and Managing Director, 780.429.7556 cory.wosnack@avisonyoung.com

p.15 Halifax                                                                                                                  
Michael Brown, Managing Director, 902.454.4110 michael.brown@avisonyoung.com

p.16 Lethbridge                                                                                                                                    
Doug Mereska, Managing Director, 403.330.3338 doug.mereska@avisonyoung.com

p.17 Montreal                                                                                                                           
Denis Perreault, Principal and Managing Director, 514.905.0604 denis.perreault@avisonyoung.com

p.18 Ottawa                                                                                                                  
Michael Church, Principal and Managing Director, 613.567.6634 michael.church@avisonyoung.com

p.19 Regina                                                                                                                              
Richard Jankowski, Managing Director, 306.559.9009 richard.jankowski@avisonyoung.com

p.20 Toronto                                                                                                               
Martin Dockrill, Principal and Managing Director, 905.283.2333 martin.dockrill@avisonyoung.com

p.21 Vancouver                                                                                                                        
Michael Keenan, Principal and Managing Director, 604.647.5081 michael.keenan@avisonyoung.com

p.22 Waterloo Region                                                                                       
Ted Davis, Managing Director, 226.366.9040 ted.davis@avisonyoung.com

p.23 Winnipeg                                                                                                                          
Wes Schollenberg, Managing Director, 204.560-1501 wes.schollenberg@avisonyoung.com

United States
p.25 Atlanta                                                                                                      
Steve Dils, Principal and Managing Director, 404.865.3663 steve.dils@avisonyoung.com

p.26 Austin                                                                                                                   
Corey Martin, Principal and Managing Director, 512.717.3084 corey.martin@avisonyoung.com

p.27 Boston                                                                                                                              
Michael Smith, Principal and Managing Director, 617.575.2830 michael.smith@avisonyoung.com

p.28 Charleston                                                                                                                                    
Chris Fraser, Managing Director, 843.725.7200 chris.fraser@avisonyoung.com

p.29 Charlotte                                                                                                                           
John Linderman, Principal and Managing Director, North Carolina 919.420.1559 john.linderman@avisonyoung.com

p.30 Chicago                                                                                                                            
Danny Nikitas, Principal and Managing Director, 312.940.8794 danny.nikitas@avisonyoung.com

p.31 Cleveland
Chris Livingston, Principal and Managing Director, 216.406.1131 chris.livingston@avisonyoung.com

p.32 Columbus, OH   
Scott Pickett, Principal and Managing Director, 614.264.4400 scott.pickett@avisonyoung.com

p.33 Dallas   
Greg Langston, Principal and Managing Director, 214.269.3115 greg.langston@avisonyoung.com

p.34 Denver                                                                                                                  
Alec Wynne, Principal and Managing Director, 720.508.8112 alec.wynne@avisonyoung.com

p.35 Detroit                                                                                                                               
Jim Becker, Principal and Managing Director, 313.209.4121 jim.becker@avisonyoung.com

p.36 Fort Lauderdale     
Pike Rowley, Principal and Managing Director, Florida 954.938.1807 pike.rowley@avisonyoung.com

p.37 Greenville             
Chris Fraser, Managing Director, 843-725-7200 chris.fraser@avisonyoung.com

p.38 Hartford     
Andrew Filler, Principal and Managing Director, 860.327.8302 andrew.filler@avisonyoung.com

p.39 Houston                                                                                                                             
Rand Stephens, Principal and Managing Director, 713.993.7810 rand.stephens@avisonyoung.com

p.40 Indianapolis         
Bill Ehret, Principal and Managing Director, 317.210.8808 bill.ehret@avisonyoung.com

p.41 Jacksonville   
Pike Rowley, Principal and Managing Director, 954.938.1807 pike.rowley@avisonyoung.com

p.42 Las Vegas
David Jewkes, Managing Director, Brokerage Operations, 702.472.7978 david.jewkes@avisonyoung.com

p.43 Long Island          
Ted Stratigos, Principal and Managing Director, 516.962.5399 ted.stratigos@avisonyoung.com

p.44 Los Angeles  
Chris Cooper, Principal and Managing Director, Southern California 213.935.7435 chris.cooper@avisonyoung.com

p.45 Memphis 
Warren Smith, Managing Director, 615.727.7409 warren.smith@avisonyoung.com

p.46 Miami
Donna Abood, Principal and Managing Director, 305.447.7857 donna.abood@avisonyoung.com   
Michael Fay, Principal and Managing Director, 305.447.7842 michael.fay@avisonyoung.com

p.47 Minneapolis          
Mark Evenson, Principal and Managing Director, 612.913.5641 mark.evenson@avisonyoung.com                                   

p.48 Nashville    
Warren Smith, Managing Director, 615.727.7409 warren.smith@avisonyoung.com 

p.49 New Jersey   
Jeff Heller, Principal and Managing Director, 973.753.1100 jeff.heller@avisonyoung.com

p.50 Oakland
Charlie Allen, Principal and Managing Director, 510.333.8477 charlie.allen@avisonyoung.com

p.51 Orange County
Keith Kropfl, Principal and Director of Brokerage Services, 949.430.0680 keith.kropfl@avisonyoung.com

p.52 Orlando
Greg Morrison, Principal and Managing Director, 407.440.6640 greg.morrison@avisonyoung.com

p.53 Philadelphia   
David Fahey, Principal and Managing Director, 610.276.1081 david.fahey@avisonyoung.com                 

p.54 Phoenix   
David Genovese, Principal and Managing Director, 480.423.7900 david.genovese@avisonyoung.com

p.55 Pittsburgh
Brad Totten, Principal and Managing Director, 412.944.2132 brad.totten@avisonyoung.com

p.56 Raleigh-Durham
John Linderman, Principal and Managing Director, North Carolina, 919.420.1559 john.linderman@avisonyoung.com

p.57 Reno                                                                                                                                 
John Pinjuv, Managing Director, 775.332.7300 john.pinjuv@avisonyoung.com

p.58 Sacramento
Thomas Aguer, Principal and Managing Director, 916.563.7827 tom.aguer@avisonyoung.com

p.59 San Antonio         
Marshall Davidson, Principal and Managing Director, 210.714.8083 marshall.davidson@avisonyoung.com 

p.60 San Diego
Jerry Keeney, Principal and Managing Director, 858.201.7077 jerry.keeney@avisonyoung.com

p.61 San Francisco
Nick Slonek, Principal and Managing Director, Northern California 415.322.5051 nick.slonek@avisonyoung.com

p.62 San Jose/Silicon Valley
Gregg von Thaden, Principal and Managing Director, 408.913.6901 gregg.vonthaden@avisonyoung.com

p.63 San Mateo
Randy Keller, Principal and Managing Director, 650.425.6425 randy.keller@avisonyoung.com

p.64 St. Louis
Tim Convy, Principal of St. Louis Operations and Managing Director - Brokerage, 314.650.6601 tim.convy@avisonyoung.com

p.65 Tampa
Ken Lane, Principal and Managing Director, 813.444.0623 ken.lane@avisonyoung.com  
Clay Witherspoon, Principal and Managing Director, 813.444.0626 clay.witherspoon@avisonyoung.com

p.66 Washington, DC                                                                                                                
Josh Peyton, Principal and Managing Director, 202.644.8688 josh.peyton@avisonyoung.com

p.67 West Palm Beach
Jonathan Satter, Principal and Managing Director, 561.721.7031 jonathan.satter@avisonyoung.com

Mexico 
p.69 Mexico City
Guillermo Sepulveda, Principal and Managing Director, 52 55 4123 7570 guillermo.sepulveda@avisonyoung.com 

United Kingdom
p.71 Coventry
Robert Rae, Principal and Managing Director, +44 (0)24 7663 6888 robert.rae@avisonyoung.com

p.72 London
Jason Sibthorpe, Principal and Managing Director, U.K. +44 (0)20 7046 6514 jason.sibthorpe@avisonyoung.com

p.73 Manchester
Mark Williams, Principal and Managing Director, +44 (0)161 819 8220 mark.williams@avisonyoung.com

Romania
p.75 Bucharest
David Canta, Principal of Bucharest operations and Managing Director, +40 727 737 894 david.canta@avisonyoung.com

Avison Young is the world's fastest-growing commercial real estate services firm. Headquartered in Toronto, Canada, Avison Young is a collaborative, global firm owned and operated by its principals. Founded in 1978, the company comprises 2,600 real estate professionals in 84 offices, providing value-added, client-centric investment sales, leasing, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial, multi-family and hospitality properties.  

Editors/Reporters  

 Please click on link to view Avison Young's Spring 2018 North America and Europe Industrial Market Report:  

https://avisonyoung.uberflip.com/i/979259-ayspring18namericaeuropeindustrialreportmay10-18final

For further information/comment/photos:  

• Sherry Quan, Principal, Global Director of Communications & Media Relations, 
Avison Young: 604.647.5098; cell: 604.726.0959 sherry.quan@avisonyoung.com

• Bill Argeropoulos, Principal and Practice Leader, Research (Canada), Avison Young: 
416.673.4029; cell: 416.906.3072 bill.argeropoulos@avisonyoung.com

• Margaret Donkerbrook, Principal and Practice Leader, U.S. Research, 
Avison Young: 202.644.8677      
margaret.donkerbrook@avisonyoung.com

• Mark Rose, Chair and CEO, Avison Young: 416.673.4028

• Earl Webb, President, U.S. Operations, Avison Young: 312.957.7610

http://www.avisonyoung.com

Avison Young is a 2018 winner of the Canada's Best Managed Companies Platinum Club designation, having retained its Best Managed designation for seven consecutive years.  

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