MARKET DRIVERS
ASKING LEASE RATES for warehouses climbed 15.7% year-over-year (YOY) to $1.33/SF NNN. Non-warehouse asking lease rates rose 12.0% YOY to $1.77/SF NNN.
WAREHOUSE DIRECT VACANCY rates dropped 50.1% YOY from 6.1% in 2Q 2021 to 3.1% in 2Q 2022. Direct vacancy rates for non-warehouse properties also fell 22.1% YOY from 2.6% in 2Q 2021 to 2.0% in 2Q 2022.
SALES ACTIVITY for non-warehouse properties grew 6.5% YOY, rising from 257,809 SF in 2Q 2021 to 274,619 SF in 2Q 2022. Sales activity for warehouses nearly tripled YOY, growing from 155,060 SF in 2Q 2021 to 605,933 SF in 2Q 2022.
DIRECT NET ABSORPTION was 152,034 SF for non-warehouse property types and negative 365,289 SF for warehouses.
ECONOMIC REVIEW
MANUFACTURING JOBS for the San Jose-Sunnyvale-Santa Clara MSA gained 3.4% YOY to 173,000. Transportation and warehousing jobs grew 8.3% YOY to 17,000
UNEMPLOYMENT in California was 4.3% for May 2022. Santa Clara County reported an unemployment rate of 1.8% during this period.
NEAR-TERM OUTLOOK
PERSISTENTLY low vacancy and availability rates for all industrial types point to the strength of the industrial market. While rising interest rates place downward pressures on industrial asking prices, investors and owner-users are still competing over a very limited supply.
THIS QUARTER nearly 320,000 SF of warehouse space has just broken ground in Fremont providing much needed inventory.
Click here to subscribe to Kidder Mathews market research.