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Page 22 — Office & Industrial Quarterly — September 2021 www.crej.com INDUSTRIAL — MARKET UPDATE A new report from the NAIOP Research Foundation finds that across the United States the demand for industrial real estate is out- pacing supply. This is no surprise, given that the pandemic acceler- ated an already fast-growing trend toward having more goods, supplies and even groceries delivered to the home or office. In Denver, the center of Colorado’s industrial and warehouse real estate market, supply still is edg- ing out demand and restricting rent growth at least in the short term, said Brian Dietz, vice president, investment officer with Prologis and a member of the NAIOP Colorado board of directors. “In Denver, it’s a story of mixed results,” Dietz said. “We have a very strong capital market, and there is a lot of capital that wants to be in Denver industrial from local and large institutional sources. Cap rates are lower than we’ve ever seen, and properties are highly val- ued. “We’ve seen for the last couple of years significant deliveries of new product, but what we’ve also seen is absorption that is only average. That is having a moderating effect on rent growth. It is our belief that an increase in leasing activity this year will take up some of that sup- ply,” Dietz said. That would mirror the national trend, according to the August NAIOP Industrial Demand Forecast. Although nearly 100 million new square feet has been delivered since the beginning of the year, 450 mil- lion sf is under construction and another 450 mil- lion is planned, the demand for indus- trial real estate still outpaces supply. Because of this, the authors of the report, Dr. Hany Guirguis and Dr. Michael Seiler, fore- cast that total net absorption in the second half of 2021 will be 162.6 mil- lion sf, with a quarterly average of 81.3 million sf. In 2022, the projected net absorption is 334.6 million sf, with a quarterly average of 83.6 million sf. “Led by coastal port cities, industrial transaction prices per square foot are on the rise, vacancy rates remain low and new leases are being signed at higher rates. Despite new current and planned supply that is greater than it has been in years, higher demand for industrial real estate is causing net absorption to remain strong. A con- tinued surge in imports from retailers restocking depleted inventories has exacerbated the shortage of ware- house space near major logistics hubs, highlighting the need for additional construction,” according to the report. The report notes that during the pandemic, savings rates increased and demand for consumer goods surged. Consumer preferences have shifted recently from saving to consumption of both goods and services, despite burgeoning inflationary concerns. But just when the nation seemed to be turning the corner on COVID-19, the delta variant has renewed concerns about the pandemic’s impact on the economy. If the uptick in infections and hospitalizations continues, con- sumers could again shift more of their purchases from in-person stores and services to e-commerce, which would support additional demand for indus- Industrial real estate demand outpaces supply Kathryn Hamilton Vice president, communications, NAIOP NAIOP Although nearly 100 million new square feet has been delivered nationally since the beginning of the year, 450 million sf is under construction and another 450 million is planned, the demand for industrial real estate still outpaces supply. Please see Hamilton, Page 33