Preliminary data shows that availability continued to increase in the industrial market in the second quarter of 2020, rising to 7.6% from 7.3% in the previous quarter. This marks the largest quarter-to-quarter rise in availability since the end of 2009 and is now 0.5% higher than at this time last year. Industrial completions slipped slightly in Q2, but still registered an impressive 56.0 million sq. ft. This was more than enough to exceed net absorption during the quarter, which fell to a 9-and-a-half-year low of 19.2 million sq. ft.
While the Q2 results certainly suggest some weakening in industrial fundamentals, performance during the quarter was still remarkably solid given the economic backdrop. Key indicators such as employment, retail sales, and industrial production all experienced historic declines at the start of the quarter as businesses across the economy were forced to shut down to slow down the spread of the COVID-19 pandemic. However, economic activity began to rebound sharply as local markets began to reopen in the middle of the quarter, and industrial real estate activity quickly resumed. In addition, e-commerce activity surged in Q2, stimulating demand for industrial space despite the severe contraction in the overall economy.
Among the 64 Tier I markets, 22 saw lower availability rates in Q2 compared to the previous quarter, and 22 also recorded year-over-year declines. On a year-over-year basis, some of the largest decreases were in Dayton, Trenton, and Kansas City, which saw availability declines of 173, 92, and 84 basis points, respectively.
Industrial availability increased in 42 markets in Q2 compared to the previous quarter, and in 42 markets relative to last year. The largest yearly increases came in Nashville, Ft. Lauderdale, and Houston, which each saw availability increase by more than 200 basis points.
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