Historically low vacancy combined with pent-up demand in the Columbus industrial real estate market is driving new speculative construction for the first time since the Great Recession. In fact, we expect delivery of 1.8 million square feet of spec construction by the end of this year.
After a six-year drought, several speculative and build-to-suit buildings, ranging from 300,000 square feet to 700,000 square feet, are in the works. More than 1 million square feet of space already has been absorbed this year — the highest amount since before the recession.
The vacancy rate stands at 7.4 percent, 320 basis points lower than the historical average. Average asking rents for modern bulk buildings have risen 7 percent since last year.
Cargo Air Service Advantage
Rickenbacker International Airport, one of the only cargo-dedicated airports in the world, is a huge growth driver. As an important part of the global, multi-modal logistics hub, Rickenbacker Inland Port moves air cargo to, from and within the United States and has routes to Singapore, Shanghai, Hong Kong and Shannon, Ireland. FedEx Air, FedEx Ground and UPS regional hubs also are on-site.
According to the U.S. Department of Commerce’s International Trade Administration (ITA), Columbus was among the top metro areas in the United States for merchandise exports in 2013, with a record-high $5.7 billion in exports, an increase of 4 percent ($243 million) from 2012 to 2013.
The top merchandise exports for Columbus in 2013 included chemicals, transportation equipment, machinery, computer and electronic products and crops, says ITA. Primary destinations for exports included Canada, Mexico, China, Germany and Indonesia.
Companies, particularly cargo and maintenance providers, are looking for warehouse space near Rickenbacker, located in the southeast quadrant of Columbus. During the third quarter of 2014, these types of companies leased 95,000 square feet in only 45 days.
With a lack of buildings 500,000 square feet or larger and a modern bulk vacancy rate at 4 percent, demand is increasing and developers are taking note. Older, traditional warehouses, which typically started at 128,000 square feet, slightly larger than the size of two football fields, are making way for larger, modern bulk warehouses. These new facilities can exceed 1 million square feet — the size of 20 to 26 football fields.
Kansas City-based VanTrust Real Estate LLC is developing in Columbus for the first time. Its 717,717-square-foot modern bulk warehouse — the largest spec building since the downturn — will be located in Groveport.
Locally based The Pizzuti Cos. and San Antonio-based USAA Real Estate Co. are jointly developing a 652,195-square-foot modern bulk facility at CreekSide Industrial Center in Obetz, Ohio.
Exxcel Project Management, another local developer, is expanding an existing 478,000-square-foot building by constructing an additional 540,000 square feet of speculative space at the CenterPoint Business Park in Obetz. Minneapolis-based Opus Development Co. is building a 484,216-square-foot spec facility at Opus Business Center at Rickenbacker.
E-commerce Ripple Effect
The current inventory of warehouse space does not meet the needs of e-commerce distributors today. Distribution centers are increasingly tasked with not only keeping shopping center shelves stocked, but directly interacting with the rising e-commerce consumer class. Pier 1 Imports, for example, is converting a traditional warehouse to a modern bulk warehouse equipped for e-commerce distribution in Grove City, Ohio.
Seattle-based Zulily, an online discount retailer, also will expand its distribution center in Obetz. Currently employing 1,000 people, Zulily’s expansion will create another 500 jobs over the next few years. Approximately 900 call center jobs will be added through late 2014 as well.
All of these modern bulk warehouses will feature modern amenities to accommodate today’s unique e-commerce distribution facility requirements. While the new buildings may appear similar to existing warehouses from the outside, the inner structure houses new technology to handle the demands of e-commerce, such as larger amounts of product stored in modern racking systems and more workers to process orders.
Modern bulk facilities are designed to meet new building requirements such as higher clear heights of 36 feet or more (compared to the traditional 32 feet), floors that can support heavier loads for stacking, and more docking bays with cross-docking capabilities to accommodate more traffic. The additional parking can also accommodate larger numbers of onsite workers.
Sunny Forecast
In addition to the advantages Rickenbacker offers, Columbus is within a 10-hour drive of 47 percent of the U.S. population, more than any other metro area. The outlook is bright with vacancy rates still falling, absorption rising and new construction ramping up through late 2016, with almost 3.5 million square feet already underway.
— By John Myers, senior vice president, and Rob Myers vice president, of Cassidy Turley. This article first appeared in the October 2014 issue of Heartland Real Estate Business magazine.