The Raleigh/Durham/Chapel Hill Triangle has captured national attention as a powerhouse of innovation and economic growth for many years, winning a steady stream of accolades for growth, technology, entrepreneurial drive and quality of life. So it comes as no surprise that while some parts of the country are still limping along in what has been the longest and most tepid recovery in recent memory, the Triangle is booming. Indeed, it’s hard to find a metric that shows the region as anything less than thriving. The unemployment rate declined sharply over the past year, down over 2 percentage points from the first quarter of 2013 to 5.1 percent in April 2014, and the region has been adding jobs — more than 26,000 nonfarm jobs in the past four quarters and 7,700 in March 2014 alone. As a result, the region’s industrial market is rapidly accelerating. Raleigh-Durham has consistently placed in the top 10 fastest growing MSAs since 1980, and the Triangle’s industrial market is primarily geared toward providing goods and services for the burgeoning local population, ensuring that demand for institutional-grade industrial product remains strong. This dynamic has also created a tendency toward a high degree of diversification, and both factors …
Industrial
Dayton, Ohio, has had its struggles over the years transitioning from a predominantly automotive manufacturing economy to one with a more diverse base of industries such as transportation and logistics, aerospace technology, medical device manufacturing and unmanned aerial vehicle (UAV) development. Throughout this tumultuous period, Dayton’s industrial commercial real estate market has had to adapt to the evolving needs of the new tenant mix. Part of that adaptation has led to the construction of several build-to-suits over the last 18 months. This construction trend is being driven by companies opting for build-to-suit projects instead of purchasing existing properties due to their age, inadequate size or functional obsolescence such as inadequate ceiling heights. The trend is evident in the large amount of industrial space that has been delivered in recent years or is currently under construction in the Dayton market. The impact of this trend is an elevated vacancy rate when compared to other Midwest markets. Dayton’s overall industrial vacancy rate at the end of the first quarter of 2014 stood at 14.8 percent compared with 5.8 percent for Cincinnati. Drivers of New Construction Like much of the industrial market throughout the country, the transportation and logistics industry is driving development …
The Seattle close-in industrial market consists of those areas within the city limits north and south of Downtown. This is a very dense market composed of about 1,995 individual buildings that amount to 46,520,000 square feet. This is the place where the first Pacific NW industries were established. The submarkets of Ballard, Interbay, SODO, Georgetown and South Park are home to old and new manufacturing-based businesses, suppliers and distributors. They are also home to behemoths like Boeing, the Port of Seattle and a majority of the Alaskan fishing fleet. In addition to decades-old industries like aerospace, ship building, custom metals fabrication, contractor suppliers and wholesale food distribution, we have newer industries emerging as well. These include craft beer, wine and spirits makers, specialty food production, software engineering, computer hardware design, new automotive sale sites, coffee roasters, digital printing, recreational equipment design and manufacturing and now even marijuana production, to name a few. This market is an amazing microcosm of the evolution of American industry. The continual growth of newer and more diverse manufacturing and distribution companies is still percolating steadily despite the setbacks of the Great Recession. This stubborn growth, coupled with the slow conversion of older industrial buildings to …
The Los Angeles/Southern California industrial real estate market ended the first quarter of 2014 with the lowest vacancy since early 2008, at an average rate of 3.8 percent. This latest positive trend in activity signifies a full recovery by the end of the year. Asking rents have climbed dramatically over the past 36 months. The Los Angeles industrial market rents have increased by as much as 20 percent to $.55 triple net, from a low mark of $.44 triple net in the first quarter of 2011. They are predicted to grow another 5 percent by year end. This rental increase is due to the robust economic recovery in Southern California, in addition to major tenants’ pent-up demand and a lack of supply for Class A distribution space. To enhance this recovery, the region’s unemployment has dropped to a low of 7.5 percent, or 50 basis points lower than the first quarter of 2013. Los Angeles/Southern California has the largest industrial base in the nation, with more than 1.6 billion square feet of product in all classes. Coupled with the lowest vacancy rate nationally at 3.8 percent – not to mention 18 consecutive quarters of positive net absorption – and this …
The coming several quarters may be a great time to be a landlord in Omaha because the market continues to see a steady decline in the overall vacancy rate. As of the fourth quarter of 2013, the industrial vacancy rate registered 4.8 percent. Although the decline has not been rapid, tenant representation specialists and space users alike are starting to observe a scarcity in the market for available industrial space. What is most telling is that new construction is largely at a standstill. Since 2010, the Omaha industrial market has added 16 new buildings to the overall inventory. These new buildings account for slightly more than 387,000 square feet of the entire 67.8 million-square-foot market. In all, 11 of these 16 new buildings were either single-tenant, build-to-suit projects or owner-occupied properties. Speculative construction has totaled only 71,300 square feet since 2010. To put that figure into perspective, the 71,300 square feet accounts for a miniscule 0.1 percent of total inventory. The lack of new product is by far the largest driving force behind today’s tight vacancy rate in greater Omaha. Stringent design requirements, rising construction costs and a shortage of developable industrial land all play a role in the dearth …
In Pittsburgh’s industrial market, the fourth quarter of 2013 finished in much the same way it began and maintained throughout the year; solid if unspectacular growth. The vacancy rate fell from 7.9 percent in the third quarter to 7.7 percent in the fourth quarter and dropped three basis points in total over the course of the year. The lack of quality Class A warehouse space continues to be a factor with vacancy levels dropping to an astounding 2.97 percent. The greater Pittsburgh’s industrial market is approximately 172 million square feet spread out over the six-county region that includes Allegheny, Butler, Beaver, Westmoreland, Washington, and Armstrong counties. The Class A portion is approximately 17.5 million square feet. With a vacancy rate of 2.97 percent, we only have a total availability across our total market of 519,750 square feet of Class A product. This is below equilibrium for a healthy market. Furthermore, the definition of Class A product in the Pittsburgh region would not necessarily hold up in markets with more speculative developments such as Columbus or Lehigh Valley. Although Pittsburgh has hit the radar of the national real estate community for the opportunity on the investment side, we are still very …
The vital signs of Cincinnati’s industrial market are collectively the healthiest they’ve been since 2007, including vacancy, absorption, lease rates, property values and investment sales activity. This uptick is particularly encouraging considering that the recovery in the Cincinnati industrial market lagged the top five markets in this property sector nationally coming out of the Great Recession. The historical 20-year average vacancy rate for Cincinnati’s industrial market has ranged between 3 and 5 percent, but rose as high as 10 percent in 2008. With overall industrial vacancy on the decline for the past seven quarters, vacancy now stands at 6.35 percent, a five-year low. Bulk Distribution Space Becomes Scarce Vacancy in the bulk distribution subsector — large warehouse buildings primarily used to accommodate e-commerce, apparel or consumer goods — has been declining for the past eight quarters and now stands at 7 percent. That’s a departure from the usual 10 to 13 percent range. In the 29 million-square-foot bulk warehouse submarket of Northern Kentucky, vacancy is less than 2 percent. Space is so limited that no Class A bulk spaces larger than 200,000 square feet are currently available in Northern Kentucky. VanTrust Real Estate LLC has begun construction on a 273,000-square-foot …
Southern New Mexico’s industrial market, specifically Dona Ana County, remained stable throughout 2013. We project solid growth in this arena for 2014. We have not seen much growth in the first quarter of 2014, though the industrial market has remained stable. Rents have also remained about the same. They have decreased in some instances as landlords compete for the few new tenants entering the market. Fortunately, Southern New Mexico has experienced an uptick as a few companies entered the market from different states, which is obviously a positive sign. A food processing company just signed a lease/purchase agreement for 40,000 square feet. This company will create 150 to 200 jobs, a significant amount for Dona Ana, which has a population of about 225,000 people. A majority of the growth has occurred in the Santa Teresa area. Union Pacific is wrapping up its 2,200-acre facility, where it has invested $500 million to create the largest intermodal inland port in the United States. Union Pacific’s Intermodal ramp, refueling and crew change station was fully operational in early April. This facility has the lift capacity to facilitate 220,000 intermodal containers annually. It will provide rail access from Mexico’s interior and Pacific Ports to …
The outlook for the West Michigan industrial real estate market remains optimistic due to consistent levels of sales and leasing activity, according to Colliers International. The industrial market has recorded six successive quarters of positive absorption despite the market seeing a major shortage of high-quality inventory. Some 522,717 square feet was absorbed during the fourth quarter alone, lowering the vacancy rate to 6.57 percent. With options for space becoming more limited every day, new construction is an important consideration for many companies. That option, however, requires vacant land on which to build. Consequently, vacant land sales have emerged as the focus of many industrial real estate transactions. Construction of industrial space has reached its highest level in eight years — 419,000 square feet completed in 2013 and 792,000 square feet underway and projected for 2014. We’ve experienced more land sales in the last six months than we’ve seen in the last six years. Our industrial team has recently closed or put under contract more than 150 acres of vacant land, and much of that acreage is slated for new construction. Ambitious Plans Several projects have already begun, including the 110,000-square-foot expansion that Undercar Products Group began occupying in November 2013, …
There is no denying the Houston commercial real estate market is one of the strongest in the nation, and all indications are it will remain on this upward trajectory — especially the industrial sector. The Urban Land Institute (ULI) recently ranked Houston as the second best market to invest in industrial real estate in the country in its Emerging Trends in Real Estate 2014 report, and the organization predicts we will continue to build on this momentum. While energy-related businesses and healthcare have certainly fueled the overall real estate growth in recent years, we are now seeing more consumer goods and e-commerce tenants take occupancy in industrial properties. This activity will ramp up even more as we move closer to the Panama Canal expansion opening in 2015, as well as the enlargement of the Port of Houston. Larger Trends In the first quarter of 2014, we saw 2.4 million square feet of industrial space delivered, and more than 8 million square feet of industrial construction underway. Vacancy remains low at 5.4 percent, and net absorption is at 1.6 million square feet for the first quarter of 2014. A steady increase in job creation and homebuilding are also contributing factors. Houston’s …