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Industrial

Market ReportsMultifamilyTexasTexas Market Reports

Industrial Development Erupts Overnight in Plano, McKinney

by Taylor Williams

While most of the Dallas/Fort Worth (DFW) area has seen a boom in industrial construction over the past decade, the Plano and McKinney submarkets have been relatively quiet until recently. Due to significant growth in residential development in the northeastern side of the metroplex, e-commerce and last-mile distribution users are increasingly demanding space in these areas. Consequently, these submarkets are no longer considered just a home for technology-based tenants. Several new projects, either under construction or proposed, are focusing on mid-size to large users. Total combined vacancy rates in these areas for flex and warehouse product are now below 5 percent. The average rental rate for flex product is around $12.25 per square foot and the average rate for warehouse space is $6.36 per square foot. Although the vacancy rate is as low as it has been in the past five years, there is a tremendous amount of activity and several market transactions that are likely to positively impact demand for speculative industrial space. While no transactions completed at this time, there have been several prospects working on proposals in the 60,000- to 100,000-square-foot size range in Plano and another prospect looking to lease between 200,000 to 600,000 square feet …

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Data CentersIndustrialMarket ReportsTexasTexas Market Reports

DFW Emerges As Top Five Data Center Market

by Taylor Williams

Development of data centers is surging across the Dallas-Fort Worth (DFW) metroplex, and the party is really just getting started. According to research from JLL, DFW is the fourth-largest data center market in the country in terms of supply with approximately 3.7 million square feet of inventory providing 505 critical megawatts of power. DFW’s development pipeline spans more than 1.1 million square feet of new projects totaling about 215 critical megawatts that are either planned or already under construction. Data centers typically produce about 150 watts of power per square foot. A facility’s total power intake minus the portion needed to cool the equipment represents its critical megawattage — its true capacity for storing and processing data. A number of state-level factors have contributed to DFW’s rapid ascension up the national data center ladder. Texas possesses a great deal of fiber optic connectivity, which gives users fast, reliable transmission of data and helps reduce costs. In addition, the state has its own power grid, as well as an abundant, cheap supply of natural gas to fuel power costs, which are typically the most expensive operating item for data centers. An arid climate, ample available land and friendly development  policies have …

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IndustrialMarket ReportsSoutheastSoutheast Market ReportsVirginia

Industrial Buyers, Developers Attracted to Richmond as Users Expand Locally

by John Nelson

While there has been a strong demand for investment properties in Richmond, there remains a limited availability of both freestanding facilities and portfolio deals. In recent investment activity, the Byrd Corporate Park in eastern Henrico County sold to a joint venture between Dreyfuss Investments and Wells Holding Group for $31.3 million after previously transferring in 2011 for $26.3 million. The 10-building flex complex spans 475,783 square feet and was 80 percent leased at the time for sale. The three-building Interport Business Center, also located in eastern Henrico, sold at the end of 2017 to MDH Partners, adding to its Richmond International Airport area holdings. Containing 620,296 square feet total, the complex sold for $29 million and is now fully leased. Leasing Buoys Occupancy Local expansion has remained strong, a trend consistent with the Richmond market, and regional and national companies with an existing presence in the area have also announced expansions. The metro area has also seen the introduction of new manufacturers with large industrial footprints, further evidencing the benefits of the area’s location and infrastructure. At the mid-year mark, the Richmond area’s industrial market has continued to strengthen, closing with an overall occupancy rate of 94 percent in the …

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IndustrialMarket ReportsNew JerseyNortheastNortheast Market Reports

Assessing the Challenges of New Jersey’s Industrial Market

by David Cohen

The industrial sector continues to experience seemingly limitless success, and New Jersey is one of the nation’s leading markets. Amid record-setting asking rents, vacancy rates and leasing velocity, it would be tempting for property owners, tenants and investors to become complacent while reaping the rewards of a sophisticated global supply chain, impressive gross domestic product and strong investment returns. But challenges remain, and real estate professionals should consider them when making decisions. To continue to thrive in the industrial space, it behooves major players to explore solutions to some of the key matters facing the region. Limited Space for Development As a general rule, companies are insisting that warehouses be built within a one- or two-day drive of the customer, and from Central New Jersey, companies can reach 130 million consumers within a day’s drive. Therefore, it is no surprise that 75 percent of the industrial leases signed during the past two years for greater than 200,000 square feet occurred in Middlesex County, primarily along the New Jersey Turnpike. However, it’s becoming increasingly difficult to find sites for construction. On top of that, when sites are identified, they often come with greater capital needs driven by redevelopment and brownfield issues. …

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IndustrialMarket ReportsTexasTexas Market Reports

Constraints in Austin Push Distribution South, Bolstering San Antonio’s Market

by Taylor Williams

Less than 100 miles along Interstate 35 separates downtown Austin from downtown San Antonio. But thanks to strong job and population growth throughout the region, that short stretch is becoming home to two industrial markets that occupy distinctively different, yet thriving, niches in the local economy. The CliffsNotes version of this story is that Austin is trending toward servicing smaller, local tenants with ties to the tech sector, while San Antonio is moving toward being a regional distribution market for larger, nationally known users. Both markets are tight: the vacancy rate for both Austin and San Antonio is between 5 and 6 percent and both are seeing very healthy tenant demand and absorption of many current and planned developments. But to understand how the markets have come to function so differently from one another, we must consider the key driving factors in each metro. Austin: Access & Availability Developing new industrial space in Austin — an industrial market with about 79 million square feet of product, according to JLL’s research — is rife with challenges. The entitlement and zoning processes are exceptionally time-consuming, and most infill land sites are priced at levels that make new construction economically implausible. But the …

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IllinoisIndustrialMarket ReportsMidwestMidwest Market Reports

Infrastructure Investments Spur Industrial Development in Chicago Market

by Kristin Harlow

There is no question that all signs are pointing in the right direction for the nation’s second-largest industrial market. Midway through the year, the vacancy rate has stabilized below 7 percent for the first time in over a decade. On top of that, quarterly deliveries totaled 4.5 million square feet, of which 3.9 million square feet was speculative. In the second quarter, 7.9 million square feet was absorbed. So what’s next for Chicago’s industrial occupiers? Luckily there are two seasons in Chicago, winter and construction. With that, state and federal agencies are collaborating on massive transportation infrastructure improvements, and funds continue to flow to improve and expand our region’s road and rail infrastructure. In addition, the Illinois Tollway has been proactively deploying capital for projects. As a result, industrial occupiers are benefitting from an enhanced flow of goods and more efficient distribution, while the industrial development community has responded with new speculative and build-to-suit projects in key areas to take advantage of these transportation improvements. I-57 Corridor Before 2014, there wasn’t a full four-way interchange at I-57 and I-294, which represented one of the few rare nodes in the nation where two interstates crossed paths but did not allow a …

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IndustrialMarket ReportsNevadaWesternWestern Market Reports

Opportunity, Demand Define Las Vegas Industrial Market

by Taylor Williams

The Las Vegas industrial sector set records in 2017, with more new construction and higher net absorption than any other time in the market’s history. New construction was dominated by pre-leased space primarily driven by transportation and logistics companies, namely ecommerce and retail-related businesses. As a result, the overall vacancy rate decreased to the second lowest level in market history. As a percentage of overall market size, Las Vegas led the country in both new construction and net absorption. The significant momentum of 2017 did carry over to the first quarter of 2018, albeit at a relatively slower rate. New construction totaled 1.3 million square feet and net absorption lagged deliveries at a positive 1 million square feet, marking the 22nd consecutive quarter of positive net absorption. The overall direct vacancy rate in the first quarter of 2018 was 4 percent, an increase of 50 basis points over the previous quarter. This provided much-needed inventory for tenants looking to enter or expand into the Las Vegas market. While the North Las Vegas submarket dominated 2017, accounting for nearly 70 percent of total net absorption, it is the Southwest submarket that is surging in 2018 with 53 percent of net absorption …

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IndustrialMarket ReportsMarylandSoutheastSoutheast Market Reports

After Record-Setting 2017, Baltimore Looks to Extend Its ‘Industrial Revolution’

by John Nelson

The greater Baltimore metropolitan region achieved positive absorption of more than 6 million square feet of warehouse and industrial space in 2017, smashing the previous record by several million square feet and triggering yet another wave of speculative development activity. While on the surface there seems to be no end in sight to this unprecedented level of activity as we cross the midway point of 2018, there does exist several warning signs that are worth monitoring. But, who wants to dwell on anything remotely negative, when experiencing a seemingly end-less supply of 600,000-square-foot requirements? A Major Industrial Market The Baltimore-Washington, D.C. region is considered the fourth largest MSA in the country with more than 10 million people in the Combined Statistical Area. Several major seaports are within close proximity, approximately one-third of all consumers residing in the United States can be accessed within a one-day truck drive and developable land is still avail-able, although an increasing number of projects involve the demolition of unusable product to make way for the modern variety. Local fundamentals mirror conditions found in “white-hot” sections of the country, including the Inland Empire in Southern California, Northern New Jersey and sections in Pennsylvania where Interstates 81 …

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IndustrialMarket ReportsMidwestMidwest Market ReportsMinnesota

Industrial Owners Find Success in Reinventing Flex and Showroom Spaces

by Kristin Harlow

The most active commercial real estate category in the Twin Cities metro area over the last several years, in terms of leasing activity and new construction sales, has been industrial product. New construction has been trending toward office warehouse and bulk buildings with higher clear heights, as tenants are implementing new racking systems and growing upward to optimize their space. On the surface, this trend may sound like it will leave behind the lower-clear height flex and office showroom buildings. However, owners of flex and office showroom buildings in Minneapolis-St. Paul are finding new interest by providing creative amenities and repositioning assets that are attracting entirely new tenant prospect types and reinventing what an office showroom building can become. The ability to target a wider potential prospect pool including office users, retailers and non-traditional industrial users is reliant on proper vacancy preparation to be able to show the space as a true blank slate. Through white-boxing the space, owners show that the space has high ceilings with an industrial feel, an aesthetic that many office users are interested in, but at a significantly lower price point versus many office buildings. Another benefit of the office showroom product is that there …

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IndustrialMarket ReportsMidwestMidwest Market ReportsMissouri

Economic Incentives Fuel Industrial Development in St. Louis Market

by Kristin Harlow

It has been a banner year thus far for the St. Louis industrial market with yet another milestone achieved. Mid-year absorption totaled 2.5 million square feet of space, a number more closely suited for the entire year versus the halfway point. Fueled by continued absorption, the market has more than 5 million square feet of space under construction with vacancy of approximately 4.9 percent. The continued success is no surprise. But economic incentives, often overlooked and underappreciated, are the unsung heroes behind each industrial development around town. Gaining knowledge  Economic incentives have been a prerequisite in attracting or retaining businesses like Amazon, World Wide Technologies and Best Buy. But they do not just benefit large corporations; local and regional users are able to enjoy new Class A real estate in these developments as well. Why? Incentives help bridge the gap for the developer and the user to account for being in a low-rent, high-construction cost market, which is not a great recipe for new development. Yes, St. Louis boasts some of the lowest asking rents in the Midwest, currently averaging $4.70 per square foot for available industrial space. One would think that businesses would flock here because of the low …

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