Economic activity slowed in the third quarter of this year. Real gross domestic product (GDP) advanced at a recently revised annual rate of 2.1 percent, according to the Bureau of Economic Analysis’s estimate. In comparison, second quarter growth measured 3.9 percent, while the third quarter 2014 rate of growth was 4.3 percent.
International trade took a milder pace in the third quarter, as slower growth in the Chinese economy and higher global economic volatility coupled with a stronger dollar impacted exporters. Real net exports totaled a negative $536.2 billion during the quarter, virtually unchanged from the prior quarter.
Retail e-commerce sales totaled $87.5 billion in the third quarter of the year, a 15.1 percent annual growth rate, according to the Census Bureau. Consumers have embraced the on-line platforms, placing distribution centers in a central role fulfilling orders.
The number of net new jobs increased in the third quarter of 2015, but at a slightly slower pace compared with the same period in 2014. During the quarter, 501,000 net employees were added to payrolls nationwide, bringing the total for the January to September period to 1.8 million. Average weekly earnings of private employees—adjusted for inflation—rose by 2.3 percent in the third quarter of this year. With demand for industrial properties rising, transportation and warehousing employment gained 23,700 new positions, while wholesale trade employment rose by 4,000 jobs.
The industrial sector posted a strong third quarter, with rising demand and declining vacancies. Industrial net absorption totaled 61.9 million square feet in the third quarter, bringing the total for the first nine months of 2015 to 164.8 million square feet, according to JLL. Warehouse and distribution centers accounted for the lion’s share of demand, followed by manufacturing. Supply picked up as well, with new completions ringing at 50.2 million square feet in the third quarter. Demand continued outpacing supply, driving industrial vacancies down to 6.7 percent, a 14-year low, according to JLL. With a tight market, industrial rents rose 6.0 percent, to an average of $4.89 per square foot in the third quarter.
Fundamentals in REALTORS® CRE markets moved in tandem with the broad markets during the second quarter 2015. Leasing volume during the second quarter rose 5.0 percent compared with the first quarter 2015. Leasing rate growth remained steady, rising 3.0 percent in the second quarter, compared with the 3.0 percent advance in the previous quarter. Industrial availability posted the largest year-over-year decline—246 basis points—to 10.8 percent.
Commercial fundamentals continued improving during the third quarter 2015. Leasing volume during the second quarter rose 3.8 percent compared with the second quarter 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the third quarter, compared with the 2.7 percent advance in the previous quarter. Industrial vacancies reached 11.5 percent during the third quarter.
Tenant demand remained strongest in the 5,000 square feet and below, accounting for 72 percent of leased properties. However, demand for space in the 5,000 – 7,499 square feet more than doubled during the third quarter, comprising 13 percent of total. Lease terms remained steady, with 36-month and 60-month leases capturing 64 percent of the market.
To access the Commercial Real Estate Outlook: 2015.Q4 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.