Why Investors Look to Ohio for Industrial Real Estate (REPORTS)

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By: Robert Kramp, Senior Vice President and Director of Research, JLL, Midwest and Great Lakes Region

Ohio is a hot spot for industrial investors across the nation. In May 2014, a Minneapolis-based real estate investment group bought a $43 million, 767,000-square-foot portfolio in Northeast Ohio. Another example: A Chicago-based company purchased a 465,000-square-foot Columbus warehouse for $8.5 million in September.

The list of similar, out-of-state investors goes on. It’s more than a trend; Ohio has become an industrial hub. JLL research released three reports, spotlighting related activity in three of the nation’s most active cities—Cincinnati, Cleveland and Columbus.

Why Ohio?

  • The Heart of It All: Ohio is America’s heartland. When it comes to location, it has set up shop right on the nation’s metaphorical Main Street. With major airports, highways and rail lines intersecting throughout the state, Ohio is nationally and internationally accessible. Ohio’s transportation infrastructure is ideal for convenient and cost effective delivery.
  • Affordability: The Midwest, overall, dominates when it comes to cost-friendly living. A whopping five cities in Ohio made Forbes’ America’s Most Affordable Cities list, including Cincinnati and Columbus, as well as Dayton, Akron and Toledo. Housing affordability, cost-of-living index, and the methodology the Bureau of Labor Statistics uses for rankings of the Consumer Price Index were used to determine which cities made the cut.
  • Nurtures Business Success: From Cardinal Health and Google, to Kroger and The Limited Brands, many of America’s top Fortune 500 companies are already doing business in Ohio’s major cities.

In terms of industrial focus, three Ohio cities stand out among the rest, offering cost effective and opportunistic landscapes.

Cincinnati: Industrial and Logistics Hot Spot 

When it comes to local Fortune 500 companies (per million residents), Cincinnati beats out New York, Boston, Chicago and Los Angeles. Thanks to the low cost of business and favorable tax structure, Cincinnati’s environment is highly competitive, and therefore, has attracted both local and foreign investors. Currently, more than 50,000 Cincinnatians are employed by foreign-owned businesses.

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Over the past year, Cincinnati experienced increased commercial real estate activity from the e-commerce and manufacturing sectors. eBay is a key example, which recently pre-leased a 631,000-square-foot warehouse. Additional big-name manufacturing companies doing business in Cincinnati include GE and Proctor and Gamble.

  • More than 3 million square feet of space under construction.
  • 70% of space under construction is speculative.
  • More than 4 million square feet absorbed in 2014.

Check out JLL’s full report for more insight and statistics on Cincinnati’s emerging industrial scene.

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Cleveland: A Story of Industrial Resurgence

Cleveland, a city historically known for its success in manufacturing has undergone a revival in recent years. Northeast Ohio’s biomedical industry is thriving, and is also occupied by a number of successful global brands, small businesses and startups.

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Today, Northeast Ohio’s economy is worth nearly $200 billion, and ranks as the twelfth largest economic region nationally. It’s characterized by a talented workforce, corporate-friendly tax structure, and excellent (low cost) quality of life. According to KPMG, Metropolitan Cleveland is the seventh-most cost-friendly region for business in the U.S.

Looking back, Cleveland has had a longstanding stake in the manufacturing industry and will likely maintain a spot among the top export metros in 2015.

  • Unemployment decreased 1.9 percentage points year-over-year in 2014.
  • Cleveland’s total net absorption in 2014 reached above 2.7 million square feet.
  • The region is now home to more than 700 biomedical businesses.

Moving forward, the landscape for Northeast Ohio will likely see low vacancy and more modern industrial space. Industrial vacancy was down 80 basis points year-over-year at the end of 2014, and the market is still seeing an upturn in demand. Check out JLL’s full report for more insight and statistics on Cleveland’s industrial scene.

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Columbus: The Nation’s Industrial Hot Spot

The Columbus industrial scene has captured the attention of investors nationwide. During 2014, 38 industrial properties were transferred to new owners. That’s a total 12.5 million square feet. Not to mention that all 38 transactions were above $2.5 million.

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Looking ahead, industrial activity isn’t showing signs of slowing in Ohio’s capital city. Between 2013 and 2014, construction activity (i.e. square feet under construction) increased by 236 percent. What’s more, about 2.8 million square feet was under construction at the start of the fourth quarter of last year.

  • Roughly 4.7 million square feet of industrial space absorbed across the metro in 2014.
  • More than 100,000 employed in logistics-related jobs.
  • Located within 10 hours of 47 percent of the U.S. population.

The cost of doing business in Columbus ranks as one of the lowest in the nation. Combined with low cost of living, the market’s sizable inventory, low warehouse costs, available tax incentives and a talented workforce, it’s a prime setting to innovate and succeed. Check out JLL’s full report for more insight and statistics on Columbus’ industrial scene.

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About the Author

robert_kramppAs Senior Vice President and Director in the Midwest and Great Lakes Region at JLL, Robert has experience in the industrial, retail, multifamily and land sectors. Read up on Robert’s experience or connect with him on LinkedIn.

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