The overall vacancy rate fell to 8.2 percent in the first quarter, down 80 basis points from a year ago and to the lowest point since the third quarter of 2008. Lakeland, Fla. (4.2 percent), Greater Los Angeles (4.4 percent) and Orange County, Calif. (4.7 percent) recorded the lowest vacancy rates in the nation. Only five out of 37 markets tracked by Cushman & Wakefield reported increased year-over-year vacancies.

Warehouse vacancy has now declined for 12 consecutive quarters after peaking in the first quarter of 2010. Consequently, rental rates are now trending up. The U.S. direct weighted average triple net rental rates today is $5.73, up from $5.59 one year ago and $5.68 at year-end 2012.

"Expansion of e-commerce is fueling demand for big-box distribution centers in major distribution hubs, and has triggered an increase in both build-to-suit and speculative development," said Cushman & Wakefield's John Morris, leader of Industrial Services for the Americas. "This wave will continue due to an undersupply of Class A space."

Year-to-date national industrial leasing activity totaled 71.2 million square feet, marking a quarterly decline attributed to a present lack of product following an impressive 19.0-percent increase in activity in the second quarter of 2012. Strong demand and an increase in construction over time are expected to offset this recent ebb in leasing activity.

Among the bright spots in leasing activity, the Inland Empire posted a 36.0-percent increase from one year ago, while Northern New Jersey recorded a 15.0-percent increase. And even with a 24.0-percent annual drop in industrial leasing velocity, Greater Los Angeles continued to lead the nation with 8.1 million square feet in leasing, followed by Chicago with 7.8 million square feet (down 11.0 percent from one year ago).

"Overall improving market fundamentals provide reason for optimism," said Morris. "Demand continues to strengthen with three full years of consecutive quarterly gains in occupancy building steam. We anticipate that the current momentum will fuel additional progress."

In fact, net industrial demand is up 52.0 percent from one year ago; 30 of 37 markets reported occupancy gains during the first three months of 2013. Nationwide, the industrial market experienced 23.2 million square feet of absorption. Chicago recorded the highest amount, with 2.6 million square feet, followed by Dallas/Ft. Worth, with 2.4 million square feet.

New construction deliveries totaled 9.2 million square feet in the first quarter, with 6.3 million square feet (68 percent) built on a speculative basis. The Inland Empire accounted for 41.3 percent of the speculative construction delivered during the first three months of 2013.

Dallas/Ft. Worth now leads the nation in construction activity, with 9.7 million square feet of the total 47.0 million square feet currently in development in the U.S. Eight speculative projects are under construction in that market, totaling approximately 3.2 million square feet. Additionally, 11 build-to-suit projects remain under construction totaling 6.5 million square feet.

Source: Cushman & Wakefield