Dan Simpson, CBRE-Albany
In the Capital Region, an industrial/warehouse market with a little over 63 million square feet of space (spread over a 10-county area), vacancy rates have returned to pre-recession levels. It has been a long and steady climb out of a deep recessionary market, which hit this sector of the market the hardest during 2009. During that time, vacancy rates were hovering around the 11 percent mark. In the second quarter of this year, the regional vacancy rate stood at 7.3 percent. Compare this figure to the fourth quarter of 2014, when the vacancy rate was 8.9 percent. As a region, we are again enjoying the absorption of industrial space, as some regional operators expand and some new faces enter the market. We are constantly examining and reviewing the market to understand the current activity, and to anticipate and prepare for the coming trends and changes.
So what has lead to the Capital District’s industrial/warehouse market recovery? Several factors are responsible. First and foremost, the overall recovery of both the national and local economies has played a significant role in our industrial recovery. According to the Bureau of Labor Statistics, the unemployment rate in the United States stood at 5.3 percent in July. At approximately the same time, the Albany metro area’s unemployment rate improved, to 4.5 percent, dropping from 5 percent over the past year. This gave our region the distinction of being one of the best performers relative to job growth in the entire state of New York. Job creation and diminishing unemployment rates create paychecks; paychecks create consumers; consumers purchase goods; and good are stored in warehouses.
Additionally, certain segments displayed growth driving up absorption. Over the past several quarters more than a few third-party logistics companies, both local and national alike, added to their square footage allotment through additional leasing activity. Building materials — in particular plumbing and heating, insulation, and lumber — have been a driver of absorption within the local market. The food and beverage segment has played also played a role in driving down the vacancy rate.
We are clearly witnessing the signs of a supply-constrained market, particularly with respect to high-quality industrial space. We are seeing a reduction in the number of choices available to users in market. Very few developers are putting up industrial buildings on speculation, but those doing so are very busy with property tours. Also, as one would expect, a decreasing supply is driving up lease rates.
It will be interesting to see what the remaining months of 2015 will bring. Indications are that the year will finish equally as strong as the mid-year point, space will continue to be absorbed, and perhaps we will begin to see some foundations being poured for some new industrial and warehouse spaces.
— By Dan Simpson, CCIM, Associate Broker, CBRE-Albany. This article originally appeared in the October 2015 issue of Northeast Real Estate Business magazine.