The Omaha industrial market, which contains a total inventory of roughly 67.5 million square feet, posted a tight vacancy rate of 5.1 percent at the end of 2012, according to commercial real estate research firm Xceligent Inc. For the year, about 652,000 square feet of space was absorbed, or about 1 percent of the market. Overall, 2012 was a strong year with an estimated 142 new leasing transactions completed. Unlike 2011, however, in which eight major deals in excess of 100,000 square feet dominated the industrial market reports, none of the deals in 2012 were blockbuster. In fact, only three transactions were in excess of 50,000 square feet. What does this mean? A lot of mid-sized deals occurred. For the first time in a while, those vacant spaces ranging from 2,000 to 10,000 square feet have accounted for a glut of excess space in recent years are getting leased. More significantly, the mid-sized deals indicate growth of both new and local businesses expanding their presence in the Omaha industrial market. Meanwhile, speculative or new construction is at a standstill. Almost all of the new construction in the market has either taken the form of build-to-suit or owner-occupied space, or is …
Industrial
The largest challenge facing the Greenville/Spartanburg industrial market is the lack of quality industrial buildings. So, how did we go from the worst recession in recent memory to a shortage of available industrial space? With the recession and the 2012 election behind us, the industrial sector has stabilized and continues to improve. Much like the rest of the country, the effects of the Great Recession were felt in the Greenville/Spartanburg market, which experienced higher-than-normal vacancy rates, lack of leasing activity and depressed rental rates. Companies planning for expansion and growth during the recession — and that ultimately survived the tough years — have recovered to the point of near-normal business. In the past few years, these companies have been able to implement their growth plans, after being on hold for an extended period. Many businesses experienced a delay in business growth, ultimately resulting in pent-up demand. The companies that were waiting to expand took advantage of the symptoms of a slowly recovering market, including depressed rental rates and high vacancy levels, to expand or enter the market at historically rental rates. In conversations with prospective clients, often times I help provide clarification on the current status of the Greenville/Spartanburg industrial …
Momentum. In a word, that’s how 2012 ended in the Memphis industrial market. Nearly 3 million square feet of net absorption in the fourth quarter of 2012 helped the market end the year with 2.3 million square feet in positive absorption — setting the tone for what we expect to be a solid 2013. The uptick in fourth quarter net absorption caused vacancy rates to fall to 12.5 percent, down from a high of more than 13 percent. But those vacancy rates can be a bit misleading when you look specifically at Class A space, where vacancy rates are at 10.4 percent. In 2009, industrial development in Memphis totaled only 743,000 square feet in combined under construction and delivered space. Things began improving in 2010 and 2011, with approximately 2 million square feet under construction and/or delivered in both years. In 2012, that number increased by 50 percent to more than 3.1 million square feet. What’s particularly noteworthy about construction activity in 2012 is that it includes speculative development, something the market hasn’t seen in quite a while. IDI has already delivered one spec building totaling 286,000 square feet and has another 870,000-square-foot spec building under construction, both in DeSoto …
The Indianapolis industrial market has experienced a significant amount of absorption during the past several quarters, driving down the multi-tenant vacancy rate to 3.3 percent and leading to a new round of speculative development, according to brokerage firm Cassidy Turley. The key engines driving growth are technology, housing, auto suppliers, and distribution centers related to Internet sales. Some 3.2 million square feet of speculative industrial space is under construction in the Indianapolis area. The city currently has 240.5 million square feet of inventory. When completed, the speculative product in the development pipeline is expected to result in the multi-tenant vacancy rate rising closer to the historical norm of approximately 4 percent. Michael Weishaar, senior vice president and principal at Cassidy Turley’s Indianapolis office, says the low industrial vacancy rate is partly the result of proper planning. “Our developers are intelligent about oversupply,” says Weishaar. “They saw a rough economy and thought we needed to re-look at our supply chain.” With so much speculative development under way, is there enough demand to absorb it all? Although vacancy rates will rise closer to their historical average in the short term when space comes available, in the long run this amount of space …
The Houston industrial market ended 2012 on a positive growth trajectory and will continue to be one of the healthiest markets in the U.S. into 2013. 2012 ended with a fourth quarter vacancy rate of 5.2 percent and a positive net absorption totaling more than 1.7 million square feet of combined industrial space. A lack of available industrial inventory in the market is driving new development projects (2.5 million square feet) for both traditional warehouse/distribution space as well as freestanding, crane-ready manufacturing facilities that remain at a premium citywide. The lack of available inventory is pushing development outwards and driving rental rates and sales prices upward. This trend will continue to grow into 2013, but rental rates and sale prices will taper-off midway through 2013 as the market can only bear so much increase. Land prices have also seen a sharp uptick forcing users and developers to consider sites upwards of $4 per square foot when they have historically fought to stay under $3 per square foot. Additionally, there is a strong need for rail-served land sites or facilities. As the energy sector continues its growth and the Port of Houston takes on more capacity, the need for rail served …
Building on the trends that began to emerge in the second half of 2010, the Toledo region’s industrial real estate market continues to improve. Demand for space in northwest Ohio and southeast Michigan is occurring at its typical slow, steady pace. The result has been positive net absorption of more than 400,000 square feet during the past year. The vacancy rate fell from 8.65 percent at the end of 2011 to 8.52 percent at the close of 2012. If the improvement in the vacancy rate slows during the next 12 months, it will more likely be due to the poorer quality and functionality of much of the residual stock of empty buildings than weakening demand. One can see this evidence with the spike in new construction driven by build-to-suit projects for several noteworthy users who could not find suitable space within the existing supply. Auto sector is big driver It would come as no surprise to anyone remotely familiar with Toledo’s history and economy that a considerable portion of the user activity has come from the automotive sector. Suppliers to primarily Chrysler Group and General Motors (GM) have been quite active and have accounted for several of the larger lease …
The Metro Phoenix industrial market has been climbing its way to recovery for the past few years, but the activity of 2012 showed the strongest signs of diversified activity of a healthy marketplace. While overall net leasing was down slightly from 2011, the city benefitted from an abundance of medium and large transactions reflecting many types of industrial users leasing and buying throughout the city. This diversity indicates overall health — and not just in our traditional big box arena. In several strong submarkets, we saw owners pushing back on users’ terms due to improved portfolio and individual property activity. The city’s big box hub of Southwest Phoenix experienced continued strong activity with a variety of notable leases and property sales. We saw a shift to speculative construction and actual groundbreakings taking place on multiple projects. Phoenix has more than 2.6 million square feet of industrial space under construction, with more than 2.2 million of that being situated in the Southwest area. Overall net absorption in that area totaled more than 1.3 million square feet in 2012, leading to a shortage of available large facilities following three years of top eight national leasing and sales activity. The overall net absorption …
New Jersey’s industrial market is showing signs of continued improvement, as evidenced by increased investment sales activity and the return of speculative development to the region. A number of significant development projects are already in progress, as well as a few proposed projects, including 2.8 million square feet of new construction at 2450 U.S. Highway 130 and 2.6 million square feet at Cranbury Half Acre Road, both located in Cranbury and within the Exit 8A submarket, which benefits from a central location that provides tremendous access to points both north and south. The Central New Jersey industrial market continues to have positive momentum with 583,653 square feet of positive net absorption in the third quarter, leading to a decline in the overall vacancy to 7.8 percent from 8.0 percent in the previous quarter. The vacancy rate is now below the 10-year historical average of 8.3 percent, an impressive recovery from a peak vacancy of 10.7 percent in the third quarter of 2009. Overall, market fundamentals remain strong and demand is expected to remain high for the remainder of 2012 and into 2013 based on a sizable number of tenants in the market and pending deals expected to close within the …
Has the pendulum swung to favor property owners in the Twin Cities industrial market? Not quite, but strong net absorption for bulk buildings and a recovering economy are creating positive momentum, bringing the market closer to equilibrium. Challenges remain for manufacturing and low-clear-height properties, but we expect that area of the Twin Cities industrial market to strengthen, too, as overall conditions continue to improve. In the third quarter, industrial net absorption totaled 669,179 square feet, driving down the vacancy rate to 11.2 percent compared with 11.8 percent in the previous quarter for the 113 million-square-foot market. The Northwest and Southwest submarkets led the way, with 329,774 square feet and 226,230 square feet of net absorption, respectively. While positive net absorption is a great sign for the Twin Cities industrial market, the statistics really get interesting when broken down for big-box bulk properties, especially modern space built since 1995 with at least 28-foot clear-height ceilings. Modern bulk industrial properties account for approximately 25 percent of the overall 25 million-square-foot bulk market, but gained more than half of the subsector’s net absorption with 131,175 square feet. That led to a 2.1 percent drop in third-quarter vacancy from the previous quarter, to 5.7 …
The Phoenix industrial market continues its convincing march toward recovery by reaching several milestones. As a more resilient sector during the recession, the industrial market was not plagued with as much bad debt and CMBS loan defaults as other sectors. Industry experts concluded the industrial sector would recover faster as favorable economic conditions such as durable goods orders and manufacturing output favored the industrial market early. The sector has posted 10 consecutive quarters of positive absorption dating back to 2010. Vacancy rates have returned to levels not seen since the third quarter of 2008. This positive direction reflects a rebound in U.S. exports, consumer spending and online purchasing, which has led to a high demand for large distribution space in which there are few options in Phoenix. Confidence in the industrial market – and in Phoenix in particular – has brought renewed interest in developing new projects. Most new construction is a combination of build-to-suit manufacturing space and several new speculative projects to meet the demand for distribution space of more than 100,000 square feet. Industrial investment sales transaction velocity remains quite strong even though it’s declined from last quarter’s significant level. However, price per square footage has increased once …