The continuing recovery in demand for industrial space, driven in large part by the ongoing rebuilding of customers’ inventories, will be a significant theme for logistics real estate owners and developers in 2012. The effect of this pent-up demand will make speculative as well as build-to-suit and development projects feasible in many markets around the world and give tenants expanded opportunities to optimize and upgrade their existing networks.
A number of well-documented factors are contributing to an economic anxiety in the United States that seems to have become the new normal. However, there have been some bright spots as well, including U.S. consumption and trade rebounding to pre-crisis levels. As consumption trends up, history tell us, customers will require more distribution and/or logistics space to accommodate their restocking efforts.
There are signs the global economic recovery has legs, and while uncertainty will remain in the global debt markets, we expect positive global economic growth overall. And despite below-average global growth, we anticipate an even healthier logistics market in 2012.
At the time of this writing, retail sales were running higher than expected, which could lead to draw-downs in inventories and could further suppress inventory growth. Inventories, already at a record low relative to sales in the fourth quarter 2011, will likely experience a rebound in growth early in 2012.
Based on the consensus outlook for GDP growth, production and trade, we should expect more than 1 percent of net absorption of distribution space globally over the next 12 months. Increased demand for logistics real estate and lower vacancy rates will translate to opportunities for well-capitalized developers to pursue build-to-suit and speculative projects in select markets.