1. What trends do you see presently in industrial development in your area? There are no new developments breaking ground and few nearing completion. There has recently been drastic increases in industrial product vacancy rates which, inherently, has compressed lease rates. I do not expect to see any new projects breaking ground until the current vacancies are absorbed and lease rates stabilize. 2. What type of industrial product is doing well in your area? Large warehouse/distribution buildings with 24-foot+ clear height continue to outperform the market vacancy rates but are still subject to lease rate compression as business revenues continue to decline. 3. Who are the active industrial developers in your area? Prologis Butters Construction REMS Group 4. Please name one or two significant industrial developments in your area. What impact will these projects have on the market? The 595 Park of Commerce, located directly off I-595 halfway between Downtown Fort Lauderdale and Weston, has recently completed its first of three phases. Upon completion, the 595 Park of Commerce will consist of 18 office, retail and warehouse buildings. The developers, REMS Group, have been able to adapt to the challenging conditions of today’s market by offering tenants an array of …
Industrial
The Albany industrial market has become almost an incubation area for the nanotechnology industry, brining major tenants with large space needs to the area. Despite the recent downturn the industrial sector is still holding it own due to the growth and success of the technology industry. Cory M. Tyksinski, principal broker/manager of NAI Platform notes that there was an initial drop in business, but that is was more of a knee jerk reaction as the economy started to slow and then essentially skidded to a stop last year. The Upstate New York marketplace, and primarily Albany, is fairly insulated from the major downturns, and unfortunately, conversely the upswings in the marketplace,” notes Tyksinski. “That is primarily because we have the government seat here and we have a tremendous base in education, as well as in research and development and now technology.” Therefore, Tyksinski explains that once people got over the initial knee jerk reaction, the market picked back up again. “Actually, we have seen an upswing in the last 3 or 4 months,” he says. Overall the growth of the nanotechnology sector has been a real boon to the market. “We have seen a lot of what would be support …
“Ride out the storm,” may be the refrain of industrial developers, landlords and tenants, as the recession and the resulting uncertainties have all players in the Twin Cities commercial real estate industry watching carefully and exploring their options. For starters, development has ground to a halt. This may be the silver lining, however, since it will enable the market to more easily absorb existing product and sublease space, thus allowing the market to recover more quickly when the economy begins to turn the corner. There is a small amount of spec product on the market, but this represents such a small amount that it has little to no impact. Fortunately, the restrained development has allowed the industrial market to catch its breath. During the first quarter, absorption fell in positive territory, with nearly 197,000 square feet absorbed, leading to a slight decline in vacancy from 10.1 percent to start the year to 9.9 percent by the first quarter’s end. The modest absorption has largely been driven by smaller deals. Another side effect has been the collapse of the land market. Land prices have come down as much as 50 percent from their highs during a flurry of activity some 12 …
In general, the economy has created an atmosphere of cautiousness as companies rethink expansions and settle for the status quo. Many companies, such as those engaged in the auto industry, are experiencing a reduction in orders and are reducing their production, inventory and workforce to adjust to this trend. On the bright side, Foxconn’s industrial park south of Santa Teresa, New Mexico, will provide thousands of new jobs to the region. Suppliers and logistic companies that service Foxconn will locate on both sides of the border, affecting Santa Teresa as well as west El Paso, as the companies compete for a piece of the pie. Fort Bliss has substantially benefited from the BRAC realignment (See “A Strong Pulse” on the cover). With additional brigades being located at Fort Bliss, the further development of the base infrastructure, housing and tactical facilities are in full swing. With the influx of the more than 60,000 people (which include military personnel and their families), the El Paso region will require additional city/county governmental services, educational facilities, off-base housing and vendors to accommodate this growth in the community. The benefit to the El Paso community will be affected exponentially. Overall, the market is not in …
Last year brought rapid change to the Inland Empire industrial market, which finished 2008 with increased vacancy rates, rising cap rates, negative absorption and negative rent growth. Throw in the region’s unemployment rate of 10 percent — one of the highest in the country — and it’s no surprise that the Inland Empire industrial sector will continue to have its challenges in 2009. That said, this market is viewed by most as having strong long-term fundamentals, which will continue to attract institutional capital and drive tenant demand. Industrial leasing is expected to remain soft this year with landlords going to great lengths to secure and retain occupancy. Vacancy rates, currently at 22 percent in the east and 12 percent in the west, will continue to trend upward as leases expire and companies continue to downsize. Effective rental rates have dropped 20 to 25 percent in the last 9 months, with flat to negative rent growth expected for 2009. As retailers continue to downsize and outsource their distribution function, third-party logistics providers will pick up the slack. Southern California is home to more than 21 million people, who may be buying fewer jet skis and flat-screen TVs, but will still need …
The Birmingham industrial market was much like the rest of the country in 2008. The recession reared its head in Birmingham, resulting in an overall decline in average rental rates and occupancy levels. The multi-tenant bulk distribution sector was the hardest hit, falling to 82.4 percent occupancy with a negative absorption of 206,000 square feet compared to the previous year’s 600,000 square feet of positive absorption. Surprisingly, the service center market showed positive absorption for the second year in a row, settling at 91.7 percent occupancy for the year end. There were no new developments completed in 2008, as landlords struggled to retain tenants and conserve cash. Other than the delivery of a 150,000-square-foot building currently under construction in Shelby County, we anticipate much of the same for 2009. Despite these challenges currently facing our market, several significant transactions completed in 2008 meant that the market was certainly not stagnant. Brookwood Pharmaceutical, a manufacturer and leading provider of surface modification and drug delivery technologies to the healthcare industry, acquired the former Saks corporate headquarters facility in the Lakeshore corridor. This 286,000-square-foot office and warehouse will receive an additional $30 million of capital investment. It is a prime example of Birmingham’s …
Greg Zeifman is a senior associate in Marcus & Millichap’s Miami office. What area is your expertise? • Miami-Dade County Industrial Properties What trends do you see presently in industrial development in your area? • I do not foresee any new starts in the Miami-Dade industrial market. Although developers will finish projects that have already begun, there will be no new significant development. The recent addition of institutional, big-box product in the northwest Miami-Dade Medley submarket will lease-up its vacant space. What type of industrial product is doing well in your area? • Newer, Class A and B product continues to do well. However, owners must keep rents stable or lower them. Small to mid-range tenants who previously occupied Class C or functionally obsolete properties now have renegotiating power and are able to move to nicer locations. Properties in close proximity to the airport will enjoy higher occupancy rates; whereas, properties in the east Miami-Dade market, such as Hialeah, where product tends to be functionally obsolete, will experience the highest vacancies. Who are the active industrial developers in your area? • Flagler Development Group is an active developer in the Dade market. Please name one or two significant industrial developments …
The Indianapolis industrial market posted a strong showing last year despite the economic challenges impacting the nation. More than 4.3 million square feet of space was absorbed in 2008, and the region’s industrial vacancy rate closed at 7.4 percent, a decrease of 1.1 percent from the start of the year. Several factors contributed to the area’s ability to move forward, not the least of which is the area’s long-standing stature as the Midwest’s crossroads for distribution. Construction continued, but on a more restrained level. Approximately 1.9 million square feet of new industrial space was completed last year, which is only a quarter of the volume — 8.8 million square feet — of new space added in 2007. A significant component of this new inventory was build-to-suit or expansions by existing owners or users. Additionally, rental rates for industrial space remained level; rents have not moved in either direction since 2007. The rates have remained low compared to other Midwest cities, which has attracted new regional and national players while encouraging local businesses to maintain and renew their existing leases. As in past years, modern bulk distribution space has led the charge of new activity. Approximately 4.3 million square feet of …
Industrial properties in the Upstate region of South Carolina continued to perform at a steady if unspectacular rate through 2008, and this trend is expected to continue through 2009. The market will continue to see good activity on the leasing side of the business. This activity, while driven by the confusion of the credit market, has still reflected the desirability of the area as a place for new businesses and the continued growth of key industries. The current expansion of BMW’s facilities has heightened the likelihood of both secondary and tertiary suppliers opening or expanding locally in anticipation of the plant’s growth. This is further intensified as the International Center for Automotive Research complex continues to grow. The recent opening of the Carroll A. Campbell Jr. Graduate Engineering Center will further improve local research and development capabilities. This strategic investment was cited as one of the reasons the Upstate area was chosen for a multi million-dollar titanium manufacturing facility. Equally impressive has been the announcement that Fitesa, a Brazilian manufacturing company, also plans to establish a presence in the region. Another source of growth has been from foreign-owned corporations that view this as a good time to expand in the …
The Memphis industrial market, comprised of 176 million square feet of warehouse space and 7.7 million square feet of flex space, reached a total of just more than 184 million square feet at the end of 2008. Deliveries during that time included just more than 2.8 million square feet in nine new buildings, including the 1.1 million-square-foot Nike Footwear Distribution Center in the Northwest submarket. In the DeSoto County, Mississippi, submarket the 800,000-square-foot Building F in the Crossroads Distribution Center and the 600,000-square-foot Building 3 in the Olive Branch Distribution Center were added as well. Annual deliveries have been in steady decline since hitting a 5-year peak of 6.9 million square feet in 2005. More than 1 million square feet of industrial space is currently under construction in the market, and more than half of the space is pre leased. Virtually all speculative building deliveries in the market have been occurring in DeSoto County, where the business environment is friendly and tax incentives are healthy. During the second quarter of 2008, 16 buildings were delivered in DeSoto County, driving the vacancy rate in the submarket to a high of 23.4 percent, as of the end of the quarter. Three straight …