MARKET DRIVERS
ASKING lease rates for warehouses ticked up 4.55% year-over-year (YOY) to $1.15/SF NNN. Non-warehouse industrial asking lease rates rose 12.9% YOY to $1.58/SF NNN.
WAREHOUSE direct vacancy rates rose 45.2% YOY from 4.4% in 2Q20 to 6.39% in 2Q21. Direct vacancy rates for non-warehouse property types fell 10.1% YOY from 3.10% in 2Q20 to 2.79% in 2Q21.
GROSS absorption for warehouses nearly tripled YOY from 399,483 SF in 2Q20 to 1.47 million SF for 2Q21. Gross absorption for non-warehouse property types remained flat YOY from 390,751 SF in 2Q20 to 391,126 SF in 2Q21.
SALES activity for all industrial property types skyrocketed when compared to the start of the pandemic. Sales volume for warehouses more than doubled YOY from 153,036 SF in 2Q20 to 323,749 SF in 2Q21. Sales volume for non-warehouse property types more than tripled YOY from 100,741 SF in 2Q20 to 320,122 SF in 2Q21.
DIRECT net absorption was 161,704 SF for warehouses and 353,863 SF for non-warehouse property types.
ECONOMIC REVIEW
MANUFACTURING jobs for the San Jose-Sunnyvale-Santa Clara MSA held steady, gaining 1.4% YOY to 168,800. Fueled by e-commerce, transportation and warehousing jobs gained 13.0% YOY to 16,500.
CALIFORNIA unemployment stood at 7.5% for May 2021. Santa Clara County recorded the third-lowest unemployment rate in the state with 4.7% during this period.
CALIFORNIA largely removed COVID-19 restrictions on June 15. As the economy improves, this is poised to increase demand for industrial properties.
NEAR-TERM OUTLOOK
Industrial properties have remained resilient during the pandemic. Demand for these properties continues to be strong. Technology and biotech firms helped drive demand for manufacturing properties, while logistics companies fuel requirements for more warehouse space. Owner-users and investors continue to chase the limited supply of available industrial properties.