There is substantial industrial development occurring in the Cincinnati market on a non-speculative basis, with three projects in various stages of completion. Foreign capital and the need for a French firm and a Japanese company to have a significant American manufacturing and distribution presence have spurred two of the developments.
Usui International Corp., a Japanese automotive/engine components maker of fuel injection systems for Ford, Honda and Toyota, has nearly completed a 90,000-square-foot, heavy industrial facility in the Cincinnati suburb of Sharonville, just north of downtown.
Usui toured the region for nearly a year before selecting the Sharonville site and purchased approximately 12 acres. Cincinnati Commercial Contracting is the developer of the build-to-suit project, which Usui will own. The project is scheduled for completion in the second quarter of this year.
The Usui deal reflects a trend among Japanese auto companies of building facilities in North America for several reasons: Japan’s energy infrastructure is aging and its production capacity is limited, particularly with the closure of its nuclear generators; the high value of the yen versus the U.S. dollar has increased the price of Japanese-made products; a need to minimize logistics and shipping time and costs by switching much of Japan’s manufacturing from Japan to North America; and Japanese auto companies’ need to be closer to their customers.
Mane, a French company that makes flavorings for the food and beverage industry as well as fragrances for the perfume industry, expanded its
presence in the Cincinnati area by acquiring 15 acres of land in Lebanon Commerce Park a year ago. Mane is building a new North American headquarters there. Lebanon is located about 30 miles northeast of downtown Cincinnati.
Including existing and future research and development space, plus manufacturing and warehouse facilities, Mane’s total plant investment in the region is 400,000 square feet, or $125 million. The newest Mane project is slated for completion by the end of 2012.
T. Henkle Schueler & Associates in Lebanon sold the land while the Columbus, Ohio office of Providence, Rhode Island-based Gilbane Inc. is undertaking the build-to-suit construction. Mane originally purchased 15 acres at the same business park in 2007 and initially built a production facility.
Mane’s new Lebanon plant will serve all of North America, yet one reason the company selected the Cincinnati market is close proximity to some of the region’s major consumer-brand companies.
In addition, the currency of foreign firms is often stronger than the dollar, which makes U.S. investment attractive to both European and Asian companies.
Special Delivery
Meanwhile, FedEx Ground plans to break ground this month on a new 175,000-square-foot distribution center. The build-to-suit is expected to be completed in 2013. FedEx is leasing this facility on 28 acres from Lexington, Kentucky-based Setzer Properties.
Henkle Schueler & Associates brokered the land sale to Setzer, and Bunnell Hill Construction will complete the build-to-suit construction. The package delivery company also has FedEx Ground facilities in Florence, Kentucky, on the south side of Cincinnati and in nearby Loveland and Vandalia, Ohio.
FedEx Ground is building the new facility as part of its ongoing strategy to ring major urban areas with multiple facilities, but also because of new federal guidelines that limit the amount of time truck drivers are behind the wheel. Under the old rule, truck drivers could work up to 82 hours within a 7-day period, on average. The new rule limits a driver’s workweek to 70 hours.
The safety legislation is spurring companies like FedEx to build a network of regional distribution centers that enable truck drivers to essentially “hand off” packages to other drivers for ongoing distribution or final delivery.
Turning a corner
The Cincinnati industrial market has improved consistently since the end of the recession. The overall vacancy rate hovered near 9.25 percent at the start of this year, down from a vacancy rate of approximately 12 percent at its peak in the middle of 2009.
After three weak quarters in 2011, net absorption of industrial space in greater Cincinnati turned positive by a little more than 120,000 square feet for the year on the back of a phenomenal fourth quarter. More than 1 million square feet was absorbed in that quarter alone.
Asking rents range from below $3 per square foot for older industrial product to more than $6 per square foot for flex/research and development space. The weighted average for industrial asking rents is near $3.50 per square foot.
With the recent resurgence in U.S. manufacturing and the infrastructure that is in place in many Midwestern markets — including a strongly skilled and affordable labor pool — the Cincinnati industrial market should continue along its positive path toward greater occupancy for the remainder of the year and into 2013.
— Joe Kramer is executive vice president with Cincinnati-based Henkle Schueler CORFAC International.