NAIOP Forecast: Industrial Space Demand (1Q12 Forecast)

Industrial Demand Expected to Grow at Low End of Normal Range

WASHINGTON, D.C. – The NAIOP Research Foundation today released the Industrial Space Demand Forecast, the fifth forecast from a model that analyzes important economic factors and net absorption data to predict future demand for industrial real estate.

According to the data:

“Demand for industrial is very much tied to the overall economy,” said Thomas J. Bisacquino, NAIOP president and CEO. “Although still small, it’s encouraging to see some positive growth in the industrial markets, it is evident that the industry won’t return to more normal rates of growth until the U.S. and global economies stabilize.”

Industrial Space Demand Forecast Data

The Industrial Space Demand Forecast is part of ongoing data and analysis by Dr. Randy Anderson, University of Central Florida, and Dr. Hany Guirguis, Manhattan College. To read a research report regarding the methodology of the forecast and to download an accompanying graphic, visit

Issued quarterly, the NAIOP Industrial Space Demand Forecast is based on Purchasing Manager Index (PMI) data provided by the Institute of Supply Management (ISM), Index of Manufacturing Output (IMO) data provided by the Federal Reserve, and net absorption data provided by CBRE Econometric Advisors.

The Industrial Space Demand Forecast was calculated using the data in the following tables:

Table 1 4Q2010 1Q2011 Current Condition Trend
PMI: Purchasing Managers Index 57.3 59.7 Strong Up
PMI - New Orders 59.0 61.9 Hot  Up 
PMI - Production  60.8  65.9  Hot  Up 
PMI - Employment 57.9  62.1  Hot  Up 
PMI - Deliveries  58.6  59.8  Strong  Up 
PMI - Inventory  50.0  49.0  Weak  Down 
  2Q2011  3Q2011     
IMO: Index of Manufacturing Output 3.37%  3.47%  Strong  Up

Table 2  3Q2011  4Q2011  Current Condition  Trend 
PMI: Purchasing Managers Index 52.5  53.1 Normal  Up 
PMI - New Orders 51.1  54.8  Normal  Up
PMI - Production 52.5  58.9  Strong Up
PMI - Employment  55.2  54.8  Normal  Down
PMI - Deliveries  51.6  51.5  Normal  Stable 
PMI - Inventory  52  45.5  Weak Down
  3Q2011  4Q2011     
IMO: Index of Manufacturing Output 3.47%  3.6%  Strong Up

Methodology for Industrial Space Demand Forecast Model

Drs. Anderson and Guirguis developed the forecasting model for the demand of industrial space at the national level. Utilizing variables that comprise the entire supply chain and lead the demand for space, the model is able to capture the majority of changes in demand.

While leading economic indicators have been able to forecast recessions and expansions, the indices used in this study are constructed to forecast industrial real estate demand expansions, peaks, declines and troughs. The Industrial Space Demand model was developed using the Kalman Filter approach, where the regression parameters are allowed to vary with time and thus are more appropriate for an unstable industrial real estate market.

This research initially examined nearly 40 real estate, economic and stock market variables that should theoretically be related to demand for industrial space. These variables included measures of employment, GDP, exports and imports, as well as air, rail and shipping data. Two variables, the Federal Reserve Board’s Index of Manufacturing Output (IMO) and the PMI Index from the Institute for Supply Chain Management PMI (ISMPMI), capture the majority of the variation in demand and the entire supply chain.

The IMO is released monthly by the Federal Reserve Board of Governors. The index measures the quality of goods produced, excluding mining and utilities. The ISMPMI is constructed using a survey of purchasing managers’ expectations. The Institute’s monthly survey has five components: new orders, production, employment, deliveries and inventories. ISMPMI leads the IMO and is a leading indicator of production in the industrial sector, followed by the actual goods that are produced, which are portrayed and captured in the IMO data. The information leads firms in their decision making on how much industrial real estate they will demand.

To access the full report, please visit the NAIOP Research Foundation or contact Kathryn Hamilton at or at 703-904-7100.

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About the NAIOP Research Foundation: The NAIOP Research Foundation was established in 2000 as a 501(c)(3) organization to support the work of individuals and organizations engaged in real estate development, investment and operations. The Foundation’s core purpose is to provide these individuals and organizations with the highest level of research information on how real properties, especially office, industrial, retail and mixed-use properties, impact and benefit communities throughout North America. For more information on how to contribute or for complimentary research reports, visit

Kathryn Hamilton