Industrial

If You Build It, Will They Come? Indy Industrial Tenants Demand Smaller Spaces

by Kristin Harlow March 14, 2019

Recently, my national research colleagues released “The Top 10 Commercial Real Estate Trends for 2019,” a piece featuring predictions on subjects such as trade tensions, labor shortages and the evolution of “co-everything.” Of all the predictions, one stood out as being especially relevant for the Indianapolis industrial market as we inch further into 2019. Indianapolis has lacked industrial space for occupiers seeking to grow, particularly in smaller segments. The great news is that the market is well on its way to remedying this ailment. Demand causing shortage As we all know, the industrial sector is undergoing an e-commerce revolution. This has created a rush of demand by retailers and third-party logistics (3PL) providers for distribution and warehouse space, especially in cities like Indianapolis, which historically has been recognized for logistics strength. As a result, industrial market fundamentals have generally tightened across much of the United States. In the fourth quarter of 2018, the U.S. industrial vacancy rate fell to 4.8 percent, the lowest rate on record. Similarly, Midwestern markets currently sitting at 4.8 percent vacancy have experienced a 50-basis point decline in vacancy since the fourth quarter of 2017. Pair that with north of 111.5 million square feet of …

March 14, 2019

Industrial Market Reports Texas Texas Market Reports

Quality of Labor, Land Availability Buoy Fort Worth Industrial Market

by Taylor Williams March 8, 2019

The DFW industrial market has enjoyed unprecedented growth over this seven-year development cycle. The market has added approximately 118 million square feet of industrial inventory over that period and absorbed 143 million square feet. Population growth in the Dallas-Fort Worth (DFW) metroplex, the state of Texas and the south-central U.S. region, as well as growth in e-commerce, are the primary tailwinds propelling this extraordinary growth. Ever since Hillwood broke ground on AllianceTexas in the late 1980s, putting north Fort Worth on the radar of industrial users, the expansion in the Fort Worth industrial market has been an ever-increasing part of the overall DFW industrial market’s growth. However, the Fort Worth industrial market’s growth is really accelerating now based on the lack of available developable industrial sites in Dallas and the Mid-Cities. Further, when users and developers compare Fort Worth and southeast Dallas, the two areas with available industrial spaces and developable industrial land, Fort Worth’s advantages with regard to infrastructure, amenities, and most importantly, labor, stand out. As the area reaches peak employment, and with labor cost being the highest percentage of a user’s overall operational cost, the workforce factor has become the most important site selection criterion for users …

March 8, 2019

Industrial Market Reports Texas Texas Market Reports

E-Commerce, Distribution Users Spar for Labor

by Taylor Williams February 22, 2019

Industrial users in Texas, particularly e-commerce firms operating out of large-format distribution centers, are finding it harder and harder to staff their facilities with experienced, talented workers. Development of both speculative and build-to-suit warehouses and distribution centers has been on fire in major Texas markets over the last several years, driven by an abundance of land, exceptional infrastructure and climbing populations. According to CoStar Group, Dallas-Fort Worth’s (DFW) industrial supply grew by 3.5 percent, or roughly 30 million square feet, in 2017. That figure represents the highest single-year inventory growth in more than a decade. Approximately 21 million square feet of new space hit the market in 2018, and for 2019, CoStar forecasts that nearly 24 million square feet of product will be delivered. Houston’s supply growth has been tamer, averaging about 12.2 million square feet annually between 2015 and 2018. But the market is projected to add another 13.2 million square feet this year, per CoStar. With a couple exceptions, more than 90 percent of the new product delivered in DFW and Houston in each year between 2015 and 2018 was distribution space. The distribution building booms in Texas’ two biggest markets have occurred in the face of escalating …

February 22, 2019

Illinois Industrial Market Reports Midwest Midwest Market Reports

Chicago Industrial Predictions: Absorption May Slow in Second Half of 2019

by Kristin Harlow February 21, 2019

As we begin 2019, there are several opposing market forces at work that are sure to influence each of us, and our respective firms and clients. These market dynamics will ultimately dictate who has a great year and why — or why not. This year, it seems the signals are more mixed than in the past several years, so making predictions about the local industrial real estate market is somewhat daunting. Nonetheless, here is what to look for in 2019. A tale of two halves Listen carefully: skip vacations, stay in town, hunker down and make as many deals as you can in 2019. Based on current supply and demand dynamics with several significant users already in play (build-to-suits, new leases, renewals, etc.), plus a recent wave of speculative deliveries, look for the first and second quarters to be fairly robust in terms of gross absorption. This should extend the growing record of 35 straight quarters of positive net absorption, dating back to the second quarter of 2009, with at least two to three more such quarters. But, like in sports, what happens in the first half can be overshadowed by a shift in momentum or other significant change in …

February 21, 2019

Arizona Development Industrial Market Reports Western Western Market Reports

Phoenix Is Defined by Land, Labor, Logistics

by Taylor Williams February 12, 2019

Phoenix has long enjoyed the benefits of land, labor and logistics. In today’s ecommerce-driven market, however, those benefits are propelling the Valley’s industrial activity, and opportunity, to new heights. The region has absorbed more than 5.8 million square feet of industrial space year-to-date. It has also welcomed almost 5 million square feet of new industrial construction, while industrial vacancy rates still sit below 7 percent — their lowest levels in 12 years. Some of this activity can be credited to the price and availability of our land. This typically involves large parcels in the West Valley within close proximity to freeways that are often available at $5 per square foot to $6 per square foot. This is attracting tremendous big box interest, particularly in the Southwest Valley submarket where much of the metro’s more than 5.7 million square feet of new construction is occurring. Lincoln Property Company delivered one of the largest of these developments this past December: the $85 million, 901,700-square-foot Lincoln Logistics Center 40. Underscoring high confidence in the industrial sector, Lincoln Logistics 40 was developed fully speculative with amenities that target ecommerce and logistics-focused users. Among these are 40’ clear height ceilings, sophisticated cross-dock configuration, and extensive …

February 12, 2019

Hawaii Industrial Market Reports Western Western Market Reports

Low Vacancy, High Demand Define Hawaii’s Industrial Market

by Taylor Williams February 5, 2019

When we last reported on the health of Oahu’s industrial market in December 2017, we offered rationale for a then 1.88 percent industrial vacancy rate. This was fueled by demand from contractors building large residential condo developments, the construction of a nearly $10 billion light rail system (voter approved at less than $5 billion), booming tourism and military sectors and large public infrastructure improvements. Oahu’s small 40.4-million-square-foot industrial market was under further compression as industrial product was being taken by the state to support rail construction, or lost due to high rise residential construction and the expansion of our main Honolulu harbor. A prohibitive industrial construction cost scale, which generally exceeds $125 per square foot for metal skin shell warehouse, had also slowed spec and build-to-suit construction. Fast forward to late 2018, and our statistics reflect an industrial vacancy rate bouncing off the bottom at just 2.02 percent. The monthly industrial base rent average is $1.20 per square foot and monthly operating expenses are $0.40 per square foot. This vacancy rate average reflects a small increase over the previous quarter as tenants scrape the bottom of the inventory barrel looking for suitable space. LoopNet cites six industrial availabilities of more …

February 5, 2019

Industrial Market Reports Midwest Midwest Market Reports Missouri

Will a Tight Labor Market Limit St. Louis Industrial Growth?

by Kristin Harlow January 31, 2019

The St. Louis industrial market is in the middle of a significant construction boom. Total square footage under construction is at a record-high 6.3 million square feet, with 2.8 million square feet of activity completed in 2018. The last two years have experienced historically high levels of overall net absorption with 4 million square feet in 2017 and 5.6 million square feet in 2016. These absorption levels are significantly higher than pre-recession market numbers. The expected 3 million square feet of positive absorption in 2018 is 1 million square feet higher than what had ever been recorded prior to 2014. A significant portion of this absorption is due to several large transactions in newly constructed, and often tax-abated, parks. Whether or not this level of construction and sizable deals is sustainable remains to be determined, but many trends within the economy indicate that this can continue. The vacancy rate for the St. Louis industrial market dropped to 6.21 percent in the third quarter of 2018, the lowest rate since 2006. This drop in available space bumped average direct asking rates up to $4.58 per square foot, the highest level since before the recession. Earth City and North …

January 31, 2019

Industrial Maine Market Reports Northeast Northeast Market Reports

Why Southern Maine’s Industrial Market is Headed for Rockier 2019

by David Cohen January 30, 2019

My mind wandered recently on a long drive, as it often does. I had the music going and, in typical Maine fashion, cell phone coverage was spotty. It was nice to effortlessly jump from thoughts of the upcoming holiday season with my young kids, to my 20-year high school reunion and old friends, to the promise of another long playoff run by my beloved Patriots. But as I passed commercial buildings and warehouses, my attention drifted to the bricks and mortar of the metro Portland industrial market. Here is what I thought as I hummed along to the hits: The Times They Are a-Changin’ Bob Dylan said it simply, and the statistics in our market suggest the same. The nearly eight-year run of a clear landlord’s market has finally shown indicators (albeit slight) that the pendulum is swinging the other way. While the year-end numbers are not yet complete, I am predicting vacancy rates will increase 200 to 300 basis points from our historically low 2017 rate of 1.25 percent. Let’s say, conservatively, our market increases to 3 percent overall vacancy. That is still what I would call a landlord’s market. However, what concerns me is that our added industrial …

January 30, 2019

Industrial Market Reports Oklahoma Texas Texas Market Reports

OKC Industrial Market Should Benefit From Rising Labor Costs Across Central U.S.

by Taylor Williams January 25, 2019

From a manufacturing perspective, Oklahoma City has historically been considered a “tertiary market” when stacked against South Central and Midwest power players such as Dallas-Fort Worth (DFW), Houston, Kansas City, San Antonio, Austin and Denver. As large manufacturing users consider multiple markets in the Central United States, Oklahoma City is often included in the initial list but typically fails to make the short list for various reasons. However, as labor costs rise, Oklahoma City may find itself being pushed to the front of the line. Past Misses Oklahoma City’s industrial market totals approximately 108 million square feet, making it a smaller market than DFW, Houston, Kansas City, San Antonio, Austin or Denver. Primarily driven by the oil & gas, aerospace and consumer goods industries, this market’s fundamentals tend to move in lockstep with oil & gas commodity prices. The city has tried to diversify the economy over the past decade and bring in non-oil & gas users. But there is still room for improvement. The metro has seen its share of growth; however, overall industrial construction still pales in comparison to larger markets. Growing Appeal The industrial booms seen in DFW, Houston, Kansas City, San Antonio, Austin and Denver over …

January 25, 2019

Industrial Kansas Market Reports Midwest Midwest Market Reports

Johnson County, Kansas: A Midwest Hub for Industry and Innovation

by Kristin Harlow January 17, 2019

Once referred to by developers as a “well-kept secret,” the Kansas City metro area is quickly developing a global reputation for skilled workforce, strong infrastructure, affordable housing and competitive overhead costs like transportation and utilities. “Kansas City is a region rising. We are dispelling the notion that Kansas City is a well-kept secret,” says Tim Cowden, president and CEO of Kansas City Area Development Council. “There is growing recognition among site locators and corporate executives that the Kansas City region is an excellent option for any number of business types, including financial services, technology centers, animal health, e-commerce or industrial.” I-35 corridor As one of the most populous counties in the metro area, Johnson County, Kansas, appeals particularly to business and industry seeking to locate outside the downtown Kansas City core. The county has added an average of 6,500 residents each year for the past decade, and private development is keeping pace. Residential and retail projects dot the I-35 corridor northeast of Olathe, Kansas, the Johnson County seat. Southwest Johnson County, meanwhile, has become an industrial heavyweight with two parks located just off the interstate. “Johnson County has a formula for success with the quality of the workforce, infrastructure that’s …

January 17, 2019

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