The St. Louis industrial market continues a slow and steady march toward recovery. The Midwest is often looked to for stability and consistency, and with the vacancy rate and lease rates changing little over the past two years, the description is holding true. In fact, the overall average lease rates for warehouse space have only dipped slightly after holding steady, while vacancy has been a consistent 8.7 percent for warehouse product. While the lease rates have been stable, we have begun to see sale prices drop, especially for vacant product. As these pricing changes begin to hit the market, the sense that we are at the bottom is prevalent, and the opportunities are there for anyone who can buy buildings with cash. Changing of the Guard While the real estate fundamentals may have remained the same for two years, the property ownership picture has changed quite a bit. The exit from the St. Louis market by TA Associates in January resulted in the entry of Cobalt Capital, which purchased the 13-building portfolio. Beverly Hills, Calif.-based Blue Real Estate has seen its flex portfolio of 850,000 square feet go back to the lender, opening the door for another player to get …
Industrial
Like many metro areas across the U.S., Boston’s 494 million-square-foot industrial market slowed as we approached elections and the end of 2012. Despite mixed signals, the situation isn’t entirely dour, and there are signs of optimism in terms of demand and activity, evidenced by a slight decrease in vacancy and 475,000 square feet of net absorption in the first half of 2012, according to CoStar Group. At a more macro level, the Boston area’s thriving technology sector has led to job growth and declining unemployment, which ultimately increases consumer demand and benefits the industrial property market. The Boston industrial market has been flat for more than three years now, but that’s created opportunities for end users to lease higher-quality properties than they previously inhabited while reducing occupancy costs, which is the prevalent trend both in Boston and nationwide. Tenants seek to improve efficiency by consolidating warehouse and distribution into more modern properties with higher clear-height ceilings and other features. While users demand more efficient and flexible industrial space, they also demand more flexible — and generally shorter — lease terms. If tenants can achieve both operational efficiency and lower costs through outsourcing to third-party logistics providers (3PLs), even better. End …
Washington, D.C.’s suburban industrial markets in Maryland and Northern Virginia have seen limited new development due to supply constraints for well-located and developable land. Currently, suburban Maryland’s industrial activity is centered around the redevelopment of inefficient but well-located properties to meet the needs of today’s warehouse users that require features such as ceilings with at least 24-foot clear heights, 120-foot truck loading courts, trailer-drop areas and flexible configurations with 50-foot on center column spacing. With its strong fundamentals, the industrial property investment sales market continues to be a focus for institutional investors and REITs. Despite overall economic sluggishness, both markets have strong upside potential. Suburban Maryland Exemplifying suburban Maryland’s redevelopment trends, Chesapeake Realty Group, Oakmont Industrial and Carlyle Group are renovating a 368,000-square-foot former special-purpose facility into a new, modern general- purpose distribution center along the eastern Capital Beltway network. A similar deal involves the renovation and Nash Finch’s subsequent 500,000-square-foot lease of a former Giant Food ’60s-era distribution center. This single transaction led to the vacancy rate falling to below 9 percent in the Landover submarket. Limited new development is occurring along the main transportation arteries feeding into D.C.’s CBD. Demand drivers include regional distributors and service companies catering …
After five years of economic challenges, the Orlando industrial market — hit harder than any other industrial region in Florida — is rebounding. During the recession, central Florida experienced what amounted to a full stop in home construction, the failure of dozens of banks and almost no foreign investment. Vacancy rates for Orlando’s industrial warehouse market peaked in 2010 at nearly 15 percent and remained high until 2011. But now the economy is picking up. Payrolls expanded by 4,400 jobs year-over-year for the period ending in May and construction of multifamily residential has grown consistently. The improvements are part of a trend that could extend for years. Today, the industrial market that had the highest vacancy rates in the state is now experiencing the greatest absorption, with 1.1 million square feet leased in the second quarter of this year, for a six-month total of 2.4 million feet. That’s a 19.3 percent gain over the same period in 2011 and the third consecutive quarter of positive absorption. The overall vacancy rate has fallen to 10.7 percent, and that doesn’t tell the whole story. Outlying areas and Class C properties are lagging. In Class A and Class B properties in southwest Orlando …
The industrial market has remained very stable over the past four years in New York’s Capital District, and promises a strong pattern of growth for the next six to 12 months. As the office market struggles in the central business district, fueled by the state’s tenuous occupancy of numerous privately held properties, the industrial marketplace has flourished with extended commitments from existing users and the entrance of new users. With Upstate New York making a name for itself in the nanotech industry, a great deal of national attention has been drawn to the region, which had previously been characterized as not being nationally significant. In addition to the tech industry, national distribution groups have committed to and/or focused their site searches in the Capital District. One of the area’s most significant industrial deals this year involved a local manufacturer making a 15-year lease commitment to remain in the region, by tripling its footprint in a single-tenant building of 140,000 square feet. This commitment to the Albany marketplace was a further sign of the support from the state’s economic development officials, the abundant availability of the appropriate workforce, and the distribution characteristics of the region. At full capacity, this facility will …
The first half of 2012 has proven fairly stable for the Columbia industrial market. While the first quarter of 2012 experienced trickle over activity from the end of 2011, the second quarter tempered that with marked slowdown. Even though the vacancy rate remained relatively flat at 15.78 percent, average asking rates actually increased 5 cents to $3.53 per square foot. The Columbia industrial market has seen significant investment during the past 12 months, with manufacturing continuing to lead the pack with major investments from Amazon.com, Mars Petcare, Nephron Pharmaceuticals, Bridgestone, Michelin and Continental Tire. South Carolina — and the Central Midlands area, in particular — has experienced significant growth. Amazon.com delivered its 1.2 million-square-foot distribution center and Nephron is building its $313 million campus in Lexington County. Mars Petcare is constructing a 290,000-square-foot expansion in Richland County, in the Southeast corridor. South Carolina is fast becoming the North American capital for tire manufacturing, with most of those facilities located throughout the Midlands region. Bridgestone is expanding, adding 474,000 square feet to its current facility and the company is constructing a new 1.5 million-square-foot manufacturing facility in Aiken. Continental Tire continues construction on its $500 million plant in Sumter County and …
Along the Seacoast in New England, the industrial sector has been busy during the past 12 months with a number of sales and leases, reflecting the steady recovery of the economy. There is more activity and we are even seeing a new crop of startups in the market looking for space. Buyers have found opportunities to pick up industrial properties at attractive prices and while locking in low interest rates from commercial local banks offering SBA and conventional financing. The largest recent deal in the market is SigSauer’s lease of a 206,000-square-foot facility at The Pease International Tradeport. The Exeter, New Hampshire-based company is making a substantial investment in building upgrades and new equipment before moving in. Rochester, New Hampshire, was successful in attracting a new 343,000-square-foot project at The Granite State Business Park. The building is a joint project between Albany Engineered Composites and Safran, a French aerospace company. The building will be located on a 50-acre parcel and will employ approximately 400 workers. Westinghouse is expanding from its existing base in Newington to an 80,000-square-foot building at the nearby Pease International Tradeport. The company has signed a lease at this high-bay building and is completing renovations before moving …
It is important to understand that the mid-2000s did not reflect a sustainable level of industrial leasing activity. Real estate in general — and Phoenix in particular — has always been subject to cycles. The past few years have seen a flight to quality with tenants moving from older buildings to newer, more modern facilities. They were able to lease new space at bargain rates that were at or below what they were paying for their older facilities. The initial signs of an improving economy have already manifested themselves in an industrial demand increase. This trend is expected to continue and gradually gain momentum, albeit not along the same steep trajectory of recent growth patterns. At the end of the first quarter of 2012, the national industrial market consisted of 289,117,054 square feet. It currently has 39,089,600 square feet of vacant space. At the beginning of 2011, the industrial vacancy rate stood at 15.5 percent. With 6,993,112 square feet of positive net absorption in 2011 and 302,468 square feet in the first quarter of 2012, the vacancy rate now registers at 13.5 percent. Despite positive absorption, the overall average rental rates have seen little improvement over 2011 with the exception …
The Kansas City industrial market is healthier than most, largely because the market was not overbuilt during the last expansion phase. So, the overall vacancy never topped 10 percent. Currently, we are seeing major shortages in spaces ranging from 100,000 square feet and above, with only a 2.5 percent to 3 percent vacancy rate in that segment. That’s particularly true among buildings with 24-foot clear height ceilings. Because vacancies are on a steady decline in building sizes of about 75,000 square feet — specifically in quality, high-cube warehouse space — the need for speculative construction is overdue. Few developers have had the fortitude or the financing to undertake speculative development in recent years. A Sun Life Financial-owned facility, which spans 600,000 square feet in Olathe, Kansas, is now fully leased to Bushnell and FedEx. The facility was built in 2008. Kessinger/Hunter & Co. is developing a second building for Sun Life at I-35 Logistics Park. The state-of-the-art, 800,000-square-foot facility will be the largest building ever built on a speculative basis in the Kansas City area. On the northern side of the market, Horizons Business Park in Riverside, Missouri, has broken ground on a 155,000-square-foot distribution center and is contemplating additional …
Economists predict that Pittsburgh will exceed its previous employment peak of 1.16 million within the year. Certainly, the Marcellus Shale and related industries have made the largest contribution to this growth — drilling activity could create more than 200,000 jobs by 2020. The industrial market received perhaps its biggest boost year-to-date from Royal Dutch Shell and Acquion Energy Corp. Shell, which signed a land-option agreement with Horse-head Corp. for its current zinc operations site in Beaver County, intends to build a world-size ethane cracker capable of cracking 80,000 barrels a day. The company will invest more than $1 billion into the regional economy and produce countless employment opportunities in both construction and production. Horsehead plans to relocate its operation to North Carolina in 2013. Aquion, the maker of aqueous electrolyte sodium ion batteries used to store renewable energy, has committed to leasing an initial 250,000 square feet at the former Sony plant in Westmoreland County. The 2.4 million-square-foot facility will enable the company to triple its employees and nearly double its occupancy within the next 5 years. LEASING ACTIVITY JUMPS 500 PERCENT Industrial leasing activity in the first quarter of 2012 increased nearly 500 percent year over year from 2011. …