Manufacturing growth to drive industrial space needs
U.S. manufacturing has boosted production 5.3% over the last year and has been expanding at a pace greater than 7% in recent months. Since February, 91,000 new jobs have been added to the rolls, but not enough in any one segment to merit a need for new space.
The industrial vacancy rate has been stuck at about 11.5% for nearly two years, according to a CB Richard Ellis survey. Today's industrial space housed 169,000 more workers than a year ago. The three industries hiring the most aggressively — metal products (22,000), electronics (14,000) and machinery (10,000) — have available space because they were previously the layoff leaders and are now operating below the average capacity utilization rate, which is likely close to 78% in July.
That said, manufacturing, especially metal products, electronics, and machinery, will continue to add employees rapidly through next year and gradually require more space for process equipment and inventory.
However, through April, construction spending for manufacturing facilities remained depressed, actually declining slightly in recent months. Construction spending is expected to jump as much as 50% from the depressed April level to the end of 2005.
Highest vacancy rates are in Austin, Texas, and Boston (lost high-tech) and Atlanta, Jacksonville, and Las Vegas (struggling speculative space). The tightest markets are New York (consumer products production, biotech expansion) and L.A. (Asian trade).