The hottest trend is to simply not develop! This holds true for all types of speculative development and is currently the case for build-to-suits. There is just nothing being built. Contemplated projects are more complex than ever. To get a development out of the ground, it now takes a true partnership between the user, developer, broker and lender. Having all the parties at the table to structure the deal is key to success in this environment. Four speculative projects, totaling approximately 1.45 million square feet, have been built since third quarter 2008 — the projects are currently 5.3 percent occupied. Facilities recently built include the 533,520-square-foot Allpoints Midwest Building 2 built by Duke and Browning in Plainfield; two buildings built by Browning in Mt. Comfort — a 423,000-square-foot modern bulk facility and a 250,000-square-foot hybrid-bulk facility; and Precedent’s 245,041-square-foot building, which is also in Mt. Comfort. These projects added 2.5 percent to the vacancy in the modern bulk product type. The above projects are located within the southwest and east submarkets of Indianapolis and situated along the Interstate 70 corridor, which is the jugular vein for commodities flow. Browning is the most active developer and is involved in three of …
Industrial
The capital market crash of 2007 and the global recession still cast a pall over Sacramento’s industrial landscape. Landlords are paying close attention to the State of California, the city’s biggest tenant, and its desire to extend leases where landlords will reduce rent (by up to 30 percent in some cases). There are no speculative developments of any significance underway in Sacramento and only a few are under development in the San Joaquin markets closer to the Bay Area, where greater population densities create some optimism. To date, the standout deal in Sacramento has been Buzz Oates Real Estate’s inking of Nestle Waters North America to a 215,000-square-foot deal on existing space at Younger Creek Drive in the Florin Fruitridge Industrial Park; the firm’s two-line bottling plant slated to open early next year. Sacramento’s traditional strength in securing large distribution commitments has recently been diverted south and west to Stockton, Tracy, Lathrop, Cordelia and as far south as Patterson. Dealmakers point to the availability of large tracts of land and closer proximity to bigger markets like the Bay Area and Southern California as key drivers. Right now, a geographic difference of 50 miles in one direction or the other is …
At nearly 1 billion square feet, the Los Angeles industrial market is one of the largest in the nation, and despite increasing vacancy in the past year, it remains one of the tightest. The Bureau of Labor Statistics has estimated that 172,100 non-farm jobs were lost between July 2008 and July 2009. Industrial-oriented jobs have been among the hardest hit during the past 12 months, including losses in trade, transportation and utilities (39,900 jobs); manufacturing (36,200 jobs); and construction (18,000 jobs). Slowing trade and reduced consumer spending is largely responsible for lower industrial demand in 2009. At the Port of Los Angeles, year-to-date TEU volume through August was 18.3 percent lower than the same period in 2008; at the Port of Long Beach, the TEU volume has declined 21.7 percent from 2008 levels. Container activity at the Los Angeles/Long Beach port complex peaked in 2006 when 15.76 million TEUs were handled. The forecast for 2009 is for 12.2 million TEUs, a decline of 22.6 percent. At mid-year 2009, total industrial vacancy in the area was 4.6 percent, up from 3.5 percent at the end of 2008. While vacancy remains low, availability has surpassed 9 percent, the highest rate in more …
Caution is the course that many industrial tenants are pursuing in the Twin Cities of Minneapolis and St. Paul, especially when it comes to leasing or acquiring new space. This is partly to do with being prudent and partly to do with firms' continued inability to dislodge money from the frozen capital markets. “More so than I have ever seen in the market, companies are very reluctant to consider relocating,” says Bill Ritter, senior vice president of Welsh Companies. “Any company that has the ability to consolidate or renew is looking at that versus the cost associated with physical relocation.” For those that are in the market for space, Ritter has optimistic news. “I have never seen a better time to be a tenant in over 25 years of experience leasing and selling industrial real estate,” he says. Ritter goes on to say that a unique trend is developing in which landlords are trying to get their tenants to renew 12 to 18 months before the end of their lease terms, and they are willing to rewrite the current rental agreement — with discounted rates — if the tenant agrees. “Sure, the landlord is giving something up, but if that …
Sonny Culp of Birmingham-based Graham & Co. looks at the Birmingham industrial market through an optimist’s glasses. While the recession has slowed activity significantly — Culp estimates that the bulk distribution vacancy rate is somewhere around 20 percent — transactions are still taking place. And on the bright side, at least the current development standstill means Birmingham won’t have tons of warehouse space sitting empty for the next few months. “The economy has slowed construction, so that when the market rebounds, those projects that need to get filled first most likely will,” Culp says. Birmingham, by location and size, is a secondary market. The city’s industrial market is closely tied to the health of corporate America; when corporations do well, space gets occupied, but in the current stagnant financial situation, it’s harder to find firms hungry for a transaction. “Historically, Birmingham has always been two or three deals shy of a shortage,” Culp says. “Today, you might say that two or three figure is eight or nine.” Sales are now the territory of mom-and-pop companies, and the leasing arena mostly consists of renewals and small leases for short terms. This is the broker’s new reality. “Any transaction person is finding …
There are several trends that are shaping the Dallas industrial market right now. The uncertainty of financial markets and lack of liquidity is certainly hampering the market. Limited access to capital is withholding business expansion. We are also working with motivated landlords that are helping make successful tenant representation transactions, whether it is a restructure or a new deal. Equity is sitting back and waiting for values to continue to fall. I’m seeing short-term commitments on renewals; tenants are reluctant to make large commitments. There is minimum activity in the market as tenants are just making do with what they have. There is growing space availability as more bankruptcies create more inventory — and also opportunities. For example, tenants like Home Interiors and Fitz & Floyd have left the market, creating more available space. There are many 30,000-square-foot to 80,000-square-foot clients in the market but not as many big deals. We have made some deals on space and land that had previously not been available. Tenants are looking for facilities with extra storage areas and ability to secure the truck court. Facilities that have access to DFW airport and 30-foot clear height or greater are a big plus in this …
While the Wichita industrial market may lack the size of its neighbor to the east — Kansas City — it still has a strong and relatively stable presence. Wichita is driven by the aviation industry, and several major aircraft manufacturers and suppliers call the city home. Overall, Wichita has traditionally been an owner-use market with some leasing from larger national companies. With the credit markets dried up and a construction pipeline that has never been that large to begin with, most activity in Wichita lately has been leasing. “January through April, leasing activity was pretty slim, but we are starting to see a lot more inquiries; there are a lot more people in the market looking to relocate, mostly to keep their rents the same in a newer facility,” says Bradley Tidemann, an associate with locally based J.P. Weigand & Sons. Some notable transactions include Weckworth Manufacturing’s purchase of a 100,000-square-foot facility south of the city in Haysville. The owner-user had previously been leasing. In addition, a 50,000-square-foot office and flex warehouse deal is expected to close this month to a local owner-user. On the leasing side, Associated Materials has relocated from a 12,000-square-foot facility to a 35,000-square-foot facility. Additionally, …
At the end of the second quarter, the total industrial square footage in Salt Lake City was more than 110.7 million with an available square footage of 7.6 million, creating a vacancy of 6.89 percent. Big box space in Salt Lake has a 7.29 percent vacancy rate, compared to 5.62 percent in second quarter 2008. Current lease rates are down 2.38 percent from the second quarter of 2008. The hardest hit industrial segment is in the 0 to 5,000-square-foot size increments, which experienced an 11.54 percent decrease in average rents from second quarter 2008. The market is down from the record years of 2007 and 2008, both in speculative development and leasing activity. Like most markets, vacancy rates climbed through the second quarter of 2009, with approximately 1.5 million square feet of existing product coming back to the market. However, the Salt Lake industrial market is in a strong position in the West; third quarter projections are strengthening. Reckitt Benckiser just broke ground on the 200-acre Phase I of Miller Sports Park Industrial Development, a $25 million, 650,000-square-foot distribution center. Another project to note is the planned groundbreaking by The Rockefeller Group on a 365,000-square-foot distribution center on a 71-acre …
While many cities in the Boston area rely on their proximity to the city to ensure economic development, outlying towns have proven equally resilient. Despite the current economic downturn, Westfield, Massachusetts, continues to secure new business due to a combination of financial incentives and its desirable location. The city has utilized these local and statewide incentives to encourage investment, including the Economic Development Incentive Program, a tax incentive program designed to stimulate business and create jobs in Massachusetts. This month, construction began on an estimated $25 million, 657,000-square-foot rapid deployment distribution center for The Home Depot. A tax incentive helped finalize plans for the new center. Westfield’s City Council and Mayor Michael R. Boulanger devised an incentive for the company that calls for a 50 percent cut in property taxes for the first 10 years of operation. The new distribution center is expected to create as many as 150 jobs. The city has also shown a willingness to go beyond tax incentives to attract business. In March, Target Corporation purchased land for the construction of a 1 million-square-foot distribution center at an estimated cost of $100 million. Before the purchase was complete, the city council passed a $10 million bond …
Buoyed by its proximity to Washington, D.C., and the resulting presence of multiple government installations — as well being the East Coast’s farthest inland sea port — Baltimore enjoys a marginal insulation from the global economic slowdown. The Social Security Administration, the Health Care Financing Administration, the National Security Agency, Ft. Meade and Aberdeen Proving Ground are all federal government outfits in the area that employ Marylanders at well above average salaries. These agencies require significant private contractor support which, in turn, supplies even more well paying jobs. Baltimore, however, is not immune to the credit crunch. At approximately 190 million square feet of space, Baltimore’s industrial market has seen some recovery at the end of the second quarter. Leasing is up half a percent from last quarter, settling at an overall vacancy rate of 10 percent. With asking rates hovering just shy of the $5 triple-net mark, developers have sharpened their pencils a bit after sitting on recently-delivered product in a market that was flooded with new construction for most of 2008. Asking rates were previously based on construction costs and projections that were developed during the boom times of 2006 and 2007. The tenant has become king, with …