What area is your expertise?
For the purposes of this report we are discussing the Industrial Market in Akron, Ohio and the five counties surrounding it (Summit, Stark, Wayne, Portage and Medina counties).
What trends do you see presently in industrial development in your area?
We are in a stable market with softness in the industrial sector, primarily due to the credit crisis and overall skepticism in the marketplace beginning in 2008 to present.
The greater Akron marketplace is made up of many older industrial buildings that were built by the rubber companies and other industrial giants such as the Hoover Company located in North Canton. Local and regional rehab developers have come into the marketplace and purchased these million-square-foot facilities and rehabbed them into multitenant, mixed-use type facilities. The attractiveness of these facilities is generally low-lease rates and the infrastructure that is already in place, making total occupancy cost lower than new construction.
What type of industrial product is doing well in your area?
Smaller industrial, newer buildings with land for expansion available on a purchase basis as a second or third opportunity from an ownership basis.
Who are the active industrial developers in your area?
Richfield, Ohio-based Realty Advisors have been the most active in terms of rehabbing older projects in and around the Akron area.
Please name one or two significant industrial developments in your area. What impact will these projects have on the market?
The Bridgestone-Firestone research and development expansion in the Firestone Park area of Akron. The deal includes $68 million in public financing offered by the state, county and city, which would include a new 240,000-square-foot technical center off of South Main Street and Firestone Boulevard. Total project is estimated at $102 million.
The biggest announcement in 2008 for the Akron area involved Industrial Realty Group out of Los Angeles redeveloping the Goodyear Tire and Rubber Company headquarters with a project approaching $900 million. Total area will cover over 500 acres, including the current General Tire Headquarter property and surrounding area. The preservation of Goodyear in the Akron area includes retention of approximately 1,790 employees and another 794 in Stark County as well. The project has the potential to add an additional 2,000 new jobs with a payroll of $80 million.
Where is the majority of development taking place? Why is this area doing well?
As stated before, the majority of development is taking place in the rehab arena and the reason this is successful is because the property is being purchased for less than $10 per-square-foot and carving it into pieces as small as 30,000 square feet at below market rates.
Please describe the industrial leasing activity in your area.
Activity has been soft in the last 8 months. There still seems to be people looking at buildings but having a problem making a decision and a commitment to space, therefore the total activity has been less than stellar for the year 2008.
Please describe the industrial sales activity in your area.
Industrial sales have been stronger in the past 2 years due than leases primarily due to the historical cost of money, even though the credit crisis has put a crimp in overall industrial sales. Those successful businesses that have been able to plan for the future are purchasing and in some cases working on custom-built new facilities.
Please give a measure of industrial vacancy rates and a measure of available sublease space.
Industrial vacancy rates vary from region to region, but average between 9.5 to 13.5 percent in the general Akron area. Sublease space is very uncommon, and there are few chances to take advantage of a sublease opportunity. Sublease space accounts for less than 5 percent of the total market.
What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year?
Interest rates have been rising over the last 6 months but still remain relatively low in comparison to a 5- year trend. I think as long as interest rates stay in the general range, 2009 should be a fairly good year for industrial sales. The only real change that we have seen locally is that the banks tend to manage their risk by charging an additional 100 basis points over past lending practices.
What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected?
That is difficult to predict, but if I had to guess, I would expect manufacturing to exceed warehousing on an overall basis. Over the past 12 months I’ve seen a resurgence in steel distribution facilities being rehabbed from inefficient models of the past to state-of-the-art distribution facilities.
Submitted by Tom Fox, SIOR, executive vice president with the Akron, Ohio office of NAI Cummins Real Estate.