Increased International Trade and E-Commerce Lead to Industrial Demand Ramp Up

Economic activity momentum decelerated in the last quarter of 2015. Real gross domestic product (GDP) advanced at an annual rate of 1.0 percent, according to the Bureau of Economic Analysis’s second estimate. International trade felt the impact of the stronger dollar in the fourth quarter. Exports declined by 2.7 percent, while imports also declined 0.6 percent, pegging real net exports at a negative $556.8 billion during the quarter.

Retail e-commerce sales totaled $89.1 billion in the fourth quarter of the year, a 14.7 percent gain compared with the same quarter of the prior year, according to the Census Bureau. E-commerce sales represented 7.5 percent of total retail sales. As more consumers shift to on-line purchases, distribution centers play a greater role in fulfilling orders.

Payroll employment rose at the strongest pace in the last stretch of the year, adding 837,000 new jobs. The figure closed the year with a total net gain of 2.7 million employees. With demand for industrial properties rising, transportation and warehousing employment gained 22,200 new positions, while wholesale trade employment rose by 24,100 jobs.

The industrial sector recorded stronger fundamentals in the fourth quarter, with rising demand and declining vacancies. Industrial net absorption totaled 66.3 million square feet in the fourth quarter, bringing the total for 2015 to 231.2 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 the year end at 115.0 million square feet. Demand continued outpacing supply, driving industrial vacancies down to 6.4 percent, a 14-year low, according to JLL. With a tight market, industrial rents rose 5.6 percent, to an average of $4.93 per square foot in the fourth quarter.


Commercial fundamentals in smaller markets continued improving during the fourth quarter of 2015. Leasing volume during the quarter rose 3.0 percent compared with the third quarter of 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the fourth quarter, compared with the 2.5 percent advance in the previous quarter. Industrial availability reached 11.4 percent, a 17-basis point decrease on a yearly basis.

comm vac rate

Lease concessions declined 3.1 percent. Tenant improvement (TI) allowances averaged $47 per square foot per year nationally.

To access the Commercial Real Estate Outlook: 2016.Q1 report visit

George Ratiu, Director, Quantitative and Commercial Research

George Ratiu, Research Economist, writes regular economic columns and conducts research in the areas of commercial real estate, international investments, mortgage performance and foreclosures. He produces NAR’s Commercial Real Estate Outlook and manages quantitative surveys, including the Commercial Real Estate Quarterly Market Survey.

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