MARKET DRIVERS
ASKING lease rates for warehouses rose 8.1% year-over-year (YOY) to $1.20/SF NNN. Non-warehouse asking lease rates climbed 23% YOY to $1.70/SF NNN.
WAREHOUSE direct vacancy rates remained steady at 5.2%. Direct vacancy rates for non-warehouse properties fell 22.7% YOY from 2.9% in 3Q 2020 to 2.2% in 3Q 2021.
SALES activity for industrial property types continues to be active. Warehouse sales volume climbed 89.6% YOY from 357,684 SF in 3Q 2020 to 678,088 SF in 3Q 2021. Non-warehouse sales volume gained 65.4% from 153,384 SF in 3Q 2020 to 253,692 in 3Q 2021.
DIRECT net absorption was 817,053 SF for warehouses and 424,340 SF for non-warehouse property types.
ECONOMIC REVIEW
MANUFACTURING jobs for the San Jose-Sunnyvale-Santa Clara MSA gained 2.1% YOY to 173,500. Transportation and warehousing jobs gained 11.7% YOY to 17,100.
UNEMPLOYMENT in California stood at 7.5% for August 2021. Santa Clara County recorded an unemployment rate of 4.8% during this period.
NEAR-TERM OUTLOOK
DEMAND for industrial properties remains strong, especially for ones with access to heavy power. Direct vacancy rates are approaching prepandemic lows.
INVESTORS and owner-occupiers circle around a shrinking inventory of high-quality properties, driving up asking rates and sale prices for all industrial property types.
Click here to subscribe to Kidder Mathews market research.