Industrial

Business-Center-at-Five-Corners-Houston

By David Ebro, president of Levey Group Despite the nearly 6.4 million square feet of new project starts during the fourth quarter of 2022, which grew the volume of Houston’s industrial space currently under construction to 33.5 million square feet, the market posted a record 30.3 million square feet of net absorption for the year. This activity drove Houston’s vacancy rate down to 3.8 percent — a decline of 220 basis points from the end of 2021. The remarkable growth throughout the Houston MSA — the nation’s fourth-largest metropolitan area — has developers racing to find buildable sites both within and beyond the city limits. As a result, industrial development is bulging out of the city and into submarkets such as Baytown, Richmond and Brookshire as developers pursue more economically feasible land among these growing population centers. Beyond favorable land opportunities, Houston’s outlying submarkets offer the workforces that tenants require for their warehouse and distribution operations. These growing submarkets are also generating an increasing amount of demand from e-commerce users in the consumer goods sector. Record Growth East of Houston Much of the industrial growth can be found east of town, near and along the Houston Ship Channel. For the …

FacebookTwitterLinkedinEmail

By John Hassler, Newmark Zimmer At the close of 2022, Kansas City’s industrial property market hit heights that would have been unimaginable only a decade prior. While Kansas City ranks as the 31st-largest MSA in the United States by population, it is the 16th-largest market nationally based on industrial square footage with nearly 315 million square feet of total inventory.  Further, Kansas City ranks 10th nationally in the percentage of annual net absorption as compared with its market size and has added an impressive 62.5 million square feet of newly developed square footage over the last 10 years. Many factors have contributed to the market’s growth trajectory including the nation’s most geo-central location (a two-day truck drive to 85 percent of the continental U.S. population), the confluence of five Class-1 railroads (with four area intermodal centers), the intersection of four of the nation’s busiest interstates (including I-35 and I-70), an available and reasonably priced workforce, an abundance of industrial development sites in pro-development communities, and an experienced, well-capitalized concentration of developers headquartered in the area.  Kansas City has leveraged those various logistical and strategic advantages at a perfect time to capitalize on an all-time high in industrial space demand with …

FacebookTwitterLinkedinEmail
The-Bellwether-District-Philadelphia

By Andrew Chused, founding partner, head of investments, Hilco Redevelopment Partners From the nation’s beginning to modern times, Philadelphia has been a bellwether city with a proud legacy of leading the nation to many of its firsts, including the country’s inaugural medical school, library, hospital, business school and stock exchange. In this city of firsts, Hilco Redevelopment Partners (HRP) is unlocking and reinventing a large portion of the city: the former 1,300-acre Philadelphia Energy Solutions (PES) site on the city’s southwest side. Not only is the redevelopment of this site transforming a relic of the city’s industrial age into a new, sustainable economy for the first time, but the project will also transform the way logistics and life sciences companies grow in southwest Philadelphia. An Economic Hub The site, aptly named The Bellwether District, represents a new ecosystem for a variety of tenants, including logistics, e-commerce and life sciences. Located in the shadows of University City and along the Schuylkill River, the project will create over 32,000 jobs and serve as an economic catalyst that drives growth to the city and region for generations to come. Upon its acquisition of the property in June of 2020, HRP quickly began the …

FacebookTwitterLinkedinEmail

By David Hodge, NAI Greywolf The demand for commercial industrial real estate was exceedingly strong in the Milwaukee market leading up to the onset of COVID-19. The economy and labor markets were also strong and incentives for onshoring spurred on this growth. Post-pandemic commercial industrial product continues its upward trend.  The catalyst for this, however, is international supply chain disruptions. The reaction to this unfortunate circumstance is the accumulation of higher inventories of raw material and finished goods. The resulting impact is high demand, especially for warehouses, in an extremely low vacancy rate environment. Demand beating inventory According to Catylist, in the second quarter of 2022, the Milwaukee market’s vacancy rates were 3.3 percent for all commercial industrial products. This is largely due to the continued lack of available inventory. High demand in part has spurred increases in rental rates to approximately $5.98 per square foot triple net.  While this is good news for landlords who look to capitalize, it presents challenges for tenants who are expanding their operations.   The other factor driving rental rates is the rapid increase in interest rates. The upcoming election may also affect the rates in the later part of the fourth quarter of …

FacebookTwitterLinkedinEmail

By Denny Sciscoe, The Lund Co. The Omaha industrial market is experiencing increased leasing velocity, positive rent growth and record-breaking development. The market consists of 18 submarkets, totaling 103 million square feet of inventory.  Omaha has traditionally been a risk-averse market with steady, slow-paced growth. Since 2016, Omaha has seen increased speculative development, which is absorbed as fast as it is built. In 2020, we began to see hyper-development, fueled by increased demand and developer confidence.  The increased demand was a result of COVID-19, where we experienced five years of growth in a 12-month period as occupiers scrambled to find space for inventories and e-commerce, which was exasperated by the demand to store “just in case” inventories. The supply and demand dynamics of our market have been almost perfectly balanced. The average deliveries are around 1.3 million square feet annually, and our average absorption has been around 1.4 million square feet.  Since the beginning of 2022, we are tracking about 5 million square feet of demand and another 2.2 million square feet of space that is currently in the construction pipeline. Overall vacancy currently sits at 2.6 percent, which is 100 basis points below our average of 3.6 percent.   …

FacebookTwitterLinkedinEmail
150-Tornillo-Way-Tinton-Falls-New-Jersey

By Taylor Williams  “Negative leverage.” At face value, the term has an undeniably ominous connotation. The first half is an umbrella word for all things adverse and pessimistic, while the second evokes a sense of financial helplessness and dependency, of being permanently hamstrung by creditors. Yet in the context of industrial investment in major markets throughout the Northeast, the term is more synonymous with flexibility and acceptance, as it represents a framework through which deals continue to get done despite the very dicey conditions of the U.S. capital markets. Since the Federal Reserve began aggressively raising the federal funds rates this spring to combat severe inflation, all commercial property types have been hit with softening buyer demand and, consequently, price declines. At the time of this writing, the nation’s central bank had a target range of 3 to 3.25 percent for short-term interest rates, nearly 300 basis points above its stated goal at the beginning of the year. Increases of that magnitude in the cost of debt adversely impact demand across all asset classes, as there are only so many buyers that can pay entirely in cash. Investors that can pay all cash expect — and usually receive — discounted …

FacebookTwitterLinkedinEmail
Urban-District-183-Euless

By Taylor Williams Much as the commercial community and society at large would like to avoid a recession, prolonged periods of contraction are part of the natural economic cycle, and the U.S. financial powers that be appear to be on a collision course for exactly that scenario. But for assets classes backed by exceptional demand drivers and fundamentals, like industrial real estate in major Texas markets, is there really a need to sweat a downturn? Like any conflict, the battle between macro- and micro-level forces essentially comes down to magnitude. Will the severity of interest rate increases — three separate hikes totaling 200-plus basis points in a few months — prevail over robust tenant demand that has fueled record occupancy and rent growth throughout Texas and beyond in recent years? Only the Federal Reserve can speak to the first variable. The nation’s central bank appears hell-bent on whipping inflation, which registered a year-over-year increase of 8.3 percent in August, and is seemingly resigned to the inevitability of recession as a byproduct of its monetary policy. As for the competing forces that are industrial fundamentals, third-quarter figures were not available at the time of this writing. But, using Dallas-Fort Worth (DFW) …

FacebookTwitterLinkedinEmail
GTX-Logistics-Park-Georgetown

By Chase Clancy, vice president, Colliers The Austin industrial market is booming. According to Colliers’ research, Austin’s industrial market continues to grow at an amazing clip, spurred by rapid population growth, major manufacturing relocations and new e-commerce and inventory trends. Despite the longstanding shadows that larger markets like Houston and Dallas have cast on Austin’s growth, the market is reaching a fever pitch of rising rents, tightening vacancy, significant new deliveries and equally noteworthy preleasing activity. Based on Austin’s population size, Colliers’ research suggests that the market has the runway — both in terms of supply and demand — to nearly double in size over the next five years. With demand for space showing no sign of cooling at the local level, we project a prolonged period of record development and record absorption.  To put that into context, Austin’s industrial market currently spans roughly 57 million square feet. We are tracking more than 40 million square feet of product in our development pipeline — more than 10.2 million square feet of which is currently under construction — with more on the horizon.  Trailing 12-month absorption stands at approximately 3.4 million square feet as of the second quarter of 2022, but …

FacebookTwitterLinkedinEmail

By Mary Lamie, Bi-State Development Modern bulk distribution buildings under construction in the St. Louis region hit a historic high earlier this year, approaching 8 million square feet. The record level of construction illustrates the industrial real estate market in the southwestern Illinois and eastern Missouri region continues to expand to meet ever-increasing demand as world and domestic markets strive to move beyond the disruption that has defined the past two years.  The need for reliable freight logistics and flexible supply chains is proving more essential than ever to keep economies moving, and regions that can meet those needs while delivering the modern bulk and manufacturing space distributors and developers demand will have the greatest potential for continued growth. In mid-2022, nearly 7.4 million square feet remained under construction in the St. Louis region, a level of construction 78 percent higher than 2021 and 47 percent higher than the most recent five-year average.  Also noteworthy is the fact that 100 percent of the modern bulk construction projects underway is speculative. That represents more speculative activity in the region today than in 2019, 2020 and 2021 combined, a clear indication that developers believe the St. Louis market is a solid place …

FacebookTwitterLinkedinEmail

By Alec Pacella, NAI Pleasant Valley The Cleveland industrial market enjoyed a strong first half of 2022, characterized by record-low vacancy rates, brisk new construction and increased rental rates and sales prices. Although the market has made several headlines over the first six months, many of these trends began several years ago and the pandemic only accelerated the activity level amongst several key sectors. Market wide, the average vacancy rate was just over 4 percent at the mid-year mark, which is a slight decrease from the 4.5 percent rate at the end of last year. By most accounts, this is a record-low level and represents a decrease of two full percentage points over the last five years. The most popular submarket, the Southeast, which encompasses favored industrial locations such as Solon, Twinsburg, Streetsboro and Aurora, finished the first half with a slightly higher rate of 4.4 percent. However, this market has also seen significant new construction, including a predominance of speculative projects.  The submarket with the lowest vacancy rate is the Southwest, which stretches from Middleburg Heights through Medina, checking in at 3.7 percent. At the other end was the downtown submarket. Characterized by a significant amount of older properties, …

FacebookTwitterLinkedinEmail