By: Dan Wendorf, Senior Vice President, Jones Lang LaSalle
Below are highlights from an article that was originally published by Heartland Real Estate Business (www.REBusinessOnline.com), reposted to this blog with permission from the Editor. Download the full article for a more detailed look at the state of the Columbus industrial real estate market.
The Columbus industrial real estate market has continued down a path of decreased vacancy and increased build-to-suit activity. Many developers and tenants are trying to determine if this space tightening is going to continue or diminish in the coming months. Industrial real estate experts who had their pulse on the market accurately predicted a year ago that absorption would be taking place at a healthy clip at the end of 2012 heading into 2013. This change in the market has resulted in limited options for tenants seeking space above 100,000 square feet. Meanwhile, developers are considering the possibility of building warehouses on a speculative basis and tenants are seeing a change in economics and concessions from previous years.
The current 7.6 percent industrial vacancy rate in the Columbus market is at an all-time low. You have to go back to the late 1990s and early 2000s to find a period when the vacancy rate was nearly as low as it is today. The recent lack of space availability is starting to impact tenant choices. A tenant that used to have six or seven options for a 400,000 square foot warehouse space is now finding that it only has two to three viable options. Additionally, landlords who used to offer steep concessions to attract or secure a deal are now dialing back their concessions and seeing an increase in rental rates overall. Even though the market is more favorable to owners than it has been at any time since the Great Recession, owners do not yet have the luxury of having multiple deals compete for the same space, or the ability to pass on a deal they would normally accept in anticipation of a better deal next week.
The changes in the market have led, as expected, to an increase in build-to-suit activity. The decrease in inventory of available product has led many industrial space users to consider the possibility that they may need to build a building to accommodate their needs. This has led many users to begin their real estate decision-making earlier than they normally would to accommodate possible construction.
The main question posed by tenants and developers alike these days is this: “Are the demand and market conditions here to stay for the foreseeable future?” The answer to this question is generally “yes.” While the vacancy rate won’t continue the quarter-over-quarter decline that it has for quite some time, the current market conditions appear to be holding strong. Download the full article, originally published by Heartland Real Estate Business.
As part of the Jones Lang LaSalle Supply Chain & Logistics Group, Dan works to stay on the leading edge of the ever evolving supply chain world and the affects it has for his clients real estate needs. View Dan’s full bio to read up on his experience and recent transactions, or connect with him on LinkedIn.
Image credit via Sylvar, Flickr Creative Commons