For the first half of 2013, the Cincinnati industrial market has reflected the growing strength of the broader economy, while gaining momentum alongside the manufacturing sector. The increased activity seen thus far has left fewer options for tenants in the market and increased leverage for landlords in negotiations for relocations, expansions and renewals. As supply tightens, new speculative construction will likely fall short of the demands of the marketplace. This trend will likely continue into 2014. Tenant Activity Accelerates While there has certainly been an uptick in the volume of prospects touring properties, these businesses are more committed to a course of action than we have seen in the last few years. Further, these companies are increasingly optimistic and giving consideration to larger spaces to accommodate future growth and longer lease terms in order to lock in today’s aggressive lease rates. Similarly, tenants in older properties are seizing this opportunity to move into more modern spaces, causing a shift in the quality of vacant inventory. A cautious mood remains, as lease negotiations continue to involve discussions of termination options and other risk-mitigation language. The northern Cincinnati suburbs have been active in the first half of the year, with more than …
Industrial
The figures for past and projected new industrial building completions are anemic in Northeast Ohio, leaving a lot of commercial real estate brokers concerned that there will not be enough buildings to meet a steady increase in buyer and tenant demand. From 2008 to 2012, a paltry 1.4 million square feet of new industrial buildings were added to the Cleveland landscape, the majority of which were designed specifically for owner occupants or were fully pre-leased. Projected new construction, as reported by real estate research firm Reis, does suggest an increase in future building velocity. However, absorption is forecast to outpace new buildings through 2017 by a factor of 4 to 1. If this were to occur, Cleveland would see a drop in vacancy rates to historically low levels, approaching five to six percent. That may not seem alarming to some observers, but when you back out functionally obsolete inventory in some of the older pockets of industry, the true vacancy rate will hover at or below four percent. “There is simply not enough product to show prospective buyers and tenants,” says Robert Wetzel of CRESCO Real Estate. “We hope this spurs some speculative construction. Depending on a prospect’s needs, we …
The San Francisco Bay Area’s major warehouse/distribution and manufacturing hub can be found along the I-880 corridor in the East Bay. This region’s industrial market has enjoyed steady growth with both overall vacancy rates and asking rental rates improving by about 10 percent year-over-year. The overall vacancy rate in the first quarter of 2013 was 10.22 percent — a three-year low — while the asking rental rate was $7.44 per square foot, triple-net, annually. Interestingly, the most significant growth this year came from the market’s largest segment: the warehouse sector. The warehouse market’s vacancy rate dropped by more than 25 percent year-over-year, to just 8.27 percent. In fact, the vacancy rates in all I-880 warehouse submarkets, aside from Newark, now sit at less than 10 percent. Asking rental rates in the warehouse market increased by nearly 8 percent to $4.80 per square foot, triple-net, annually. Several properties were listed during the second quarter of 2013 and therefore not included in these statistics. However, these properties boast asking rates as high as $5.76. Cornish & Carey Commercial Newmark Knight Frank believes these latest trends indicate an imminent spike in asking rates in the warehouse market. Third-party logistics providers, or 3PLs, are …
Much like the economy in general, commercial real estate has experienced its share of ups and downs over the past 10 years. However, the strength of Utah’s economy, established infrastructure and strategic regional location are sustaining the Salt Lake industrial market and securing its position as one of the most resilient in the nation. For three consecutive years, Utah has been ranked as the “Best State for Business” by Forbes magazine. It was also recently designated as a boom state by the U.S. Chamber of Commerce. The strength of the local economy has convinced many national and international companies to relocate to Utah, and new construction has followed close behind. By the end of the first quarter of 2013, there were 1.4 million square feet of industrial space under construction, 70 percent of which was pre-leased. Although overall market activity slowed during that quarter, as compared to 2012, the Salt Lake market continues to experience growth. Consequently, industrial availability remains below the average for the Western region. Another sign of market strength is the improvement in lease rates. Utah’s industrial market experienced increasing lease rates and positive net absorption. In fact, from March 2012 to March 2013, the overall achieved …
The Dallas/Fort Worth industrial market has performed very well during the past three years. Healthy market fundamentals have created an environment in DFW that is highly conducive for robust growth, though the sluggish national economic recovery will cause some volatility in the pace of that growth. Strong job gains, an expanding position as a global distribution hub and local market confidence are all characteristics driving industrial market performance. The warehouse/distribution sector drove demand in the DFW industrial market during the first quarter of 2013, with flex space also in demand. Net absorption of industrial space across the Metroplex totaled 1.3 million square feet during the first quarter of 2013, with warehouse/distribution product accounting for 62 percent of the space taken. This compares to 2012 when net absorption of warehouse/distribution space totaled 8.8 million square feet, making up for move-outs in the manufacturing sector. Total net absorption for all product types was 8.3 million square feet during 2012. Industrial inventory is expanding in DFW with approximately 3.7 million square feet of industrial space under construction or renovation as of March 2013. This compares to 2.1 million square feet under construction or renovation one year ago. Developers are responding to a lack …
Like many markets in the Midwest and across the U.S., the Columbus industrial sector started the year sluggishly. First-quarter net absorption fell into the red with few notable leases to report, although a couple of significant investment sales closed. Generally, industrial activity is back-loaded into the second half of most years, and that should be the case for Columbus in 2013. Also, few markets have brighter long-term prospects than Central Ohio. After closing the fourth quarter of 2012 with 500,000 square feet of net absorption, Central Ohio’s 260-million-square-foot industrial market gave back 239,439 square feet in the first quarter of 2013, resulting in an 8.9 percent vacancy rate. The bulk warehouse sector suffered through 833,816 square feet of negative net absorption in the first quarter, resulting in a jump in the vacancy rate of 233 basis points to 10.6 percent. Bare Escentuals, a cosmetics retailer, registered the first quarter’s biggest industrial lease, expanding by 102,155 square feet to claim the entire 512,113-square-foot building at 5255 Centerpoint Drive. While leasing trudged along, a few investment sales took place in the first quarter of 2013, with notable deals including the sale of two buildings by KTR Capital Partners to affiliates of Welsh …
Overall, the Atlanta real estate market has continued to improve. Low interest rates have helped stabilize assets and attract new business, with manufacturing leading the way. At the end of first quarter 2012, CoStar Group reported the overall Atlanta industrial vacancy rate was 15.5 percent. For the same period ending in 2013, CoStar reported the vacancy had fallen to 12.7 percent. Those numbers have not come easy and are a true testament to the quality of Atlanta’s real estate brokers, landlords and owners who have shown a creative ability to solve problems and make deals. The past 12 months have been filled with exciting new project announcements, including build-to-suits. Among the companies that have announced construction projects include Baxter Healthcare, Porsche, PPG, Caterpillar, Hill Phoenix and Mitsubishi. Additionally, companies such as US Lumber, Subaru, American Building Supply, Atlanta Bonded, Carters and Decoster have recently expanded, filling existing vacancies in the market. While the list is impressive, we need more expansion from the existing industry. According to the U.S. Census Bureau, the population in Atlanta’s MSA was 5.4 million in 2012, which included 1.9 million households. STDB Online data service projects that the Atlanta MSA population will increase at an average …
The industrial real estate market in Southeast Wisconsin continued its climb upward during 2012 as the overall vacancy rate fell from 7.1 percent to 6.5 percent. The result was positive net absorption of 3.6 million square feet for the year. This trend marks two-and-a-half straight years without a quarter of negative absorption. Seven of the eight counties in the Milwaukee industrial market area posted a reduction in vacancies during 2012. In Kenosha County, for example, the vacancy rate dropped from 11.1 percent in the fourth quarter of 2011 to 9.4 percent in the fourth quarter of 2012. Two transactions by Venture One Real Estate LLC accounted for most of the positive net absorption. The first transaction, which occurred in December 2012, was the sale of a 62,000-square-foot facility to EMCO Chemical Distributors Inc. This deal was followed shortly by Venture One’s acquisition of the 160,300-square-foot former Cenveo Inc. facility in Kenosha. Kenosha’s industrial market should perform well this year because of overflow demand from the Racine County market, which will necessitate deals in Kenosha. The shortage of space in Racine County will make it a better candidate for build-to-suit and speculative developments in 2013. Transaction Highlights Strong demand in Waukesha …
The industrial real estate market in West Michigan, and particularly in Kent County, continues to trend positive. CBRE’s most recent survey of this real estate class recorded the fifth consecutive period of positive absorption, resulting in a vacancy rate of 7.8 percent for gross industrial space. The industrial base in West Michigan includes nearly 95 million square feet of gross space, of which nearly 50 million square feet is categorized as “leased” space, with the balance “owner occupied.” The absorption of space is being led by the slow and steady improvement of economic conditions in our region. As of the December 2012, the Grand Rapids unemployment rate stood at 6.5 percent, much better than Michigan and the nation, with unemployment rates of 8.9 percent and 7.8 percent, respectively, for the same period. Economic Catalysts Much like the rest of the state, West Michigan has benefited from the steady improvement of the auto industry. The increase in vehicle sales — brought about by both pent-up demand following the recent recession and by need resulting from natural disasters such as Hurricane Sandy — has boosted manufacturing orders to local companies that supply parts and capital equipment to the auto industry. Additionally, our …
The rising demand for bulk warehouse space among e-commerce users is driving the New Jersey industrial market. After climbing to 14.1 percent during the third quarter of 2010, the vacancy rate for warehouse space for the 10-county region in Northern and Central New Jersey has declined to 12.5 percent during the first quarter of 2013. More than 7 million square feet of inventory has been absorbed since the middle of 2011. Increased demand resulted in rising average asking rents during 2012, the first year of steady increases since 2007. Nearly 90 percent of the net absorption occurred in Central New Jersey, more specifically along the New Jersey Turnpike from exits 7A to 8A, where vacancy rates ascended to as high as 22.5 percent during the third quarter of 2009 and currently stand at 14.4 percent. Adding to the momentum of activity in Central New Jersey is Amazon’s commitment to open two large fulfillment centers here, demonstrating the significant impact that e-commerce is having on the state’s commercial real estate market. The first of these two warehouses, which is slated to open in 2014 in Robbinsville (Mercer County), will generate an estimated 700 jobs and more than $22 million in tax …