MARKET DRIVERS
ASKING LEASE RATES for warehouses climbed 15.2% year-over-year (YOY) to $1.29/SF NNN. Non-warehouse asking lease rates rose 9.3% YOY to $1.65/SF NNN
WAREHOUSE DIRECT VACANCY rates cratered, falling 56.5% YOY from 6.1% in 1Q 2021 to 2.7% in 1Q 2022. Direct vacancy rates for non-warehouse properties dropped 11.5% YOY from 2.7% in 1Q 2021 to 2.4% in 1Q 2022
SALES ACTIVITY for non-warehouse properties doubled YOY, rising from 125,954 SF in 1Q 2021 to 308,888 SF in 1Q 2022. Sales activity for warehouses halved YOY, dropping from 351,079 SF in 1Q 2021 to 164,784 SF in 1Q22.
DIRECT NET ABSORPTION was 325,582 SF for warehouses and negative 76,071 SF for non-warehouse property types.
ECONOMIC REVIEW
MANUFACTURING JOBS for the San Jose-Sunnyvale-Santa Clara MSA gained 3.1% YOY to 171,900. Transportation and warehousing jobs grew 5.5% YOY to 17,300.
UNEMPLOYMENT in California was 5.4% for February 2022. Santa Clara County reported an unemployment rate of 2.9% during this period.
NEAR-TERM OUTLOOK
WITH DIRECT VACANCY RATES for all properties at 2.6%, the industrial market remains strong. Demand stays high for all industrial properties as tenants compete for a very limited supply. With only 161,315 SF of warehouse space under construction, asking rates are expected to climb for the foreseeable future. Asking lease rates are expected to increase faster for properties with access to heavy power.
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