Columbus OH Industrial Trends Q3 2011

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Columbus OH Industrial Trends Q3 2011

  1. 1. Q3 2011 | INDUSTRIALGREATER COLUMBUS REGIONINDUSTRIAL TRENDS REPORT Construct and Expand INDUSTRIAL MARKET OVERVIEW The third quarter continued the positive growth from second quarter with more than 1.8 million square feet of positive absorption. Concerns of a double dip recession and continued economic malaise persist however as the national, state and local unemployment rates edge upward. The signs in the market are good however. With 1.8 million square feet in completed construction and 1.8 million square feet of absorption, the Columbus region industrial real estate market seems to be at the front end of an expansionary phase. A number of leases this quarter were expansions into larger space byMARKET INDICATORS tenants who were previously in the market. Continued on page 2... Q3 Q4 FORECASTS AND REFLECTIONS 2011* 2011** • There were a few significant institutional sales its 500,000-square-foot facility in New Albany (sales with property occupancy of 100 percent). (see page 4 for more New Albany construction VACANCY Pensyn Investment purchased the 1,272,227 news). Pizzuti is underway with a build-to-suit NET ABSORPTION square foot facility at 2890 W. Fair Avenue in for MBM in Groveport of approximately 125,000 Lancaster for an undisclosed amount. Cole square feet. CONSTRUCTION Real Estate Investments purchased the • Tenants are optimistic about growing consumer RENTAL RATES — — 479,000-square-foot 400 Case Avenue in demand, but cautious in expanding their lease Newark for $11.9 million from Carey Realty for long terms (5+ years). Companies are still *Actual change from previous quarter Investments. leary of another slowdown. **Projected change from previous quarter • Mars Petcare completed its 1.3 million-square- foot facility in Madison county. Accel completed RENTAL RATES PROPERTY TYPE VACANCY RATES OVER COMPLETIONSRENTAL RATES Asking rental rates in-Rates for the Major Product Types 17.0 2,500,000 creased slightly from last $8 2.5 $2.20 16.0 2,000,000 quarter. Supply has de- $2.15 15.0 1,500,000 crease over the past two 2.0 $2.10 quarters by 1.6 percent $2.05 14.0 1,000,000 1.5$6 points, from 13.2 to 11.6Rental Rate $2.00 1.0 $1.95 13.0 500,000 percent. Depending on the $1.90 12.0 0 profile of the vacancy left in 0.5 $4 $1.85 market we may see prices 11.0 (500,000) 0 $1.80 edge even further upward. 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q10 4Q10 10.0 (1,000,000) $2 9.0 (1,500,000) 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Q2 Q3 08 08 09 09 09 09 10 10 10 10 11 11 11 8.0 (2,000,000) General Industrial R&D/Flex Warehouse/Dist. 1 5 10 15 20 25 30 Completions Absorptions Total Market Vacancy Ratewww.colliers.com/columbus
  2. 2. RESEARCH & FORECAST REPORT | Q3 2011 | INDUSTRIAL | GREATER COLUMBUS REGION Delaware REGIONAL INDUSTRIAL ECONOMICS while year over year manufacturing is down by County Union The Federal Reserve Bank of Cleveland reports 1.3 percent. Trade, Transportation, and Utilities County at least once a quarter in the Federal Reserve’s employment fell by 300 employees from June North Beige Book about the economic activity of the and with an increase 1.9 percent year over year. LickingMadisonCounty County fourth district, which includes the Columbus Mining, logging, and Construction decreased by Metropolitan Statistical Area (MSA). The Beige 500 from June and is up 8.6 percent year over West East Book from September 2011 reported that year. CBD industrial activity in the fourth district remained stable on the whole. Freight transportation ASKING RATES Southwest Southeast Fairfield executives reported that shipping volume had Average asking rental rates increased slightly County continued on a slightly upward trend. Some from second quarter. R&D/Flex space increased Pickaway County respondents reported successfully increasing by $.11, General industrial by $.04, and shipping rates. Capital outlays have accelerated Warehouse/Distribution by $.14. The bottomingThe Columbus industrial market consists during 2011 compared to other years due to a of prices has likely occurred and we expect thatof 10 suburban submarkets and the need to replace aging equipment. for the next few quarters we will see slightCentral Business District. The totalinventory for the region is 212 million improvement on lease rates even if the economysquare feet of space Manufacturers reported that production was dips as real estate prices are a lagging indicator. stable but they indicated that there have been declines in orders and in backlogs. Expectations MARKET INTEL called for additional slowing in demand which Market Activity Volume is the sum of the they attributed to uncertainty and caution. absolute value of each absorption change in the Manufacturers remain committed to capital market and it tells us a little more about what spending plans for 2011. Capacity utilization exactly happened to the market behind the stabilized or declined slightly. Hiring continued at absorption number. The Market Activity Volume a modest pace but managers are having a was 5,783,960 square feet which is the largest difficult time finding high-skilled workers. amount of change in one quarter since before Q1 2009. Net positive absorption in the market, The Bureau of Labor Statistics reported that 1.8 million square feet, explains only 28 percent Manufacturing employment of 62,600 employees of the changes that occurred this quarter. in July was an increase of 5,000 over June MARKET ACTIVITY SALES ACTIVITY PROPERTY ADDRESS SALES DATE SALE PRICE SIZE SF GRANTOR GRANTEE PRICE / SF TYPE SUBMARKET 2890 W Fair Avenue August - 1,272,227 AIC Ventures Pensyn Investments - Ware./Dist. Fairfield 400 Case Avenue July $11,900,000.00 479,000 Carey Realty Investments Cole Real Estate Investments $24.84 Ware./Dist. Licking 6100 Opus Drive August 12 $13,739,280.00 676,155 RT Rickenbacker III LLC Exeter 6250 Opus LLC $20.32 Ware./Dist. Southeast 6360 Port Road August 15 $8,900,000.00 434,120 RT Rickenbacker II LLC Exeter 6360 Port LLC $20.50 Ware./Dist. Southeast 2919-2999 Lewis Center August 16 $12,362,000.00 377,880 ProLogis North American CLPF-Capital Park 4 LP $32.70 Ware./Dist. Southwest Way Properties Fund I, LLC 2700 international September 16 $3,067,500 152,800 RPH Industrial, LLC Tarrier holdings $20.04 Ware./Dist. West Street 3811 Twin Creeks Drive September 9 $1,300,000.00 45,000 Bank of America Meritex Twin Creeks LLC $28.89 Flex/R&D West 763 Hague Avenue July 11 $850,000.00 42,017 CREPD LLC Flo Realty Ohio LLC $20.23 Flex/R&D West 222 Stover Drive August 18 $1,150,000.00 34,925 Advantage Bank American Howa Kentucky Inc $32.93 Flex/R&D Delaware LEASE ACTIVITY PROPERTY ADDRESS LEASE SF LESSOR LESSEE ASKING PRICE (NNN) TYPE SUBMARKET 3301 Toy Road 292,956 Opus Real Estate Union Supply Co $3.25 Bulk Warehouse Southeast 4555 Creekside Parkway 250,846 Pizzuti Genco $3.25 Ware./Dist. Southeast 2160 McGaw Road 135,000 Columbus 2, LLC Midwest Express, Inc. $1.50 Ware./Dist. Southeast 2400 Spiegel Drive 127,996 TRT-DCT Rickenbacker IV Allrite Logistics $1.00 Ware./Dist. Southeast 3319 Southwest Boulevard 70,800 Kansas City Life Insurance Co. Safety Today Inc $3.25 Bulk Warehouse SouthwestP. 2 | COLLIERS INTERNATIONAL
  3. 3. RESEARCH & FORECAST REPORT | Q3 2011 | INDUSTRIAL | GREATER COLUMBUS REGIONUPDATE Market ComparisonsINDUSTRIAL MARKET Net Absorption Construction Asking Rental RatesSUBMARKET Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions WH/Dist R&D/FlexCBD 5,907,062 716,317 12.1% 97,767 362,358 - - - $4.75EAST 20,682,243 4,240,670 20.5% (527,826) (465,336) 878,000 500,000 $3.30 $5.50FAIRFIELD 6,771,842 444,127 6.6% 600 78,600 - - $4.00 $6.90LICKING 18,727,930 1,362,016 7.3% - 337,874 - - $2.66 -MADISON 8,148,397 - 0.0% - - - 1,300,000 - -NORTH 16,747,580 1,623,462 9.7% (124,130) (106,088) - - $3.91 $4.92NORTH DELAWARE 9,132,849 1,051,634 11.5% (191,668) (169,383) - - $3.00 $6.75PICKAWAY 3,550,850 71,900 2.0% - - - - $2.48 -SOUTHEAST 64,181,757 9,316,121 14.5% 1,696,473 1,792,455 125,000 - $2.67 $3.24SOUTHWEST 17,683,127 1,442,880 8.2% 243,762 70,905 - - $2.79 $3.03UNION 6,333,817 518,565 8.2% (11,964) 7,232 - - - $5.60WEST 35,935,786 3,902,168 10.9% 644,976 1,644,189 - - $2.23 $4.59TOTALS 213,803,240 24,689,860 11.5% 1,827,990 3,552,806 1,003,000 1,800,000 $2.70 $4.34 Net Absorption Construction Asking Rental RatesSUBMARKET Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions By Product TypeR&D/FLEX 20,210,125 3,116,036 15.4% 107,851 371,516 - - $4.28GENERAL INDUSTRIAL 71,945,581 6,131,857 8.5% (447,299) 135,456 428,000 500,000 $3.24WAREHOUSE/ 121,647,534 15,441,967 12.7% 2,167,438 3,045,834 575,000 1,300,000 $2.70DISTRIBUTIONTOTALS 213,803,240 24,689,860 11.5% 1,827,990 3,552,806 1,003,000 - $2.96QUARTERLY COMPARISON AND TOTALS Net Absorption Construction Asking Rental RatesQUARTER, YEAR Total SF Vacant SF Vacancy % Current Quarter Year-to-date Current Completions ($)Q2, 2011 211,998,240 26,074,727 12.3 2,103,147 1,640,784 1,992,000 - $2.80Q1, 2011 211,923,599 27,972,230 13.2 (468,993) (468,993) 1,992,000 - $2.72Q4, 2010 205,420,829 26,113,915 12.71 743,685 (766,901) 1,575,000 (536,292) $2.57Q3, 2010 205,957,121 27,183,626 13.20 313,420 (1,381,820) 170,000 - $2.93 CONSTRUCTION McGraw-Hill Construction reported that construction starts for commercial, industrial, hotel and institutional projects slipped 46 percent in the eight-county region for July to less than $69.5 million, from $127.9 million in July 2010. Very little speculative construction has occurred in the market in the last two years except for a recent project Pizzuti is working on in New Albany. It seems that the market reacted quickly to the bad economic news from April through June 2011. The slow down of economic growth will keep speculative projects at bay for some time but it wiil likely not deter well-funded, build-to-suit projects. COLLIERS INTERNATIONAL | P. 3
  4. 4. RESEARCH & FORECAST REPORT | Q3 2011 | INDUSTRIAL | GREATER COLUMBUS REGIONCENTRAL BUSINESS DISTRICT Right Logistics leased 127,996 square feet at 2400 Spiegel Drive; SB Capital expanded intoThe Central Business District (CBD) has nowrecorded a full of year positive absorption since 96,053 more square feet of 4458 Alum Creek 512 offices inthird quarter 2010 by adding 97,767 square feet. Drive. Typifying the expansionary nature of the third quarter, Union Supply Co. has signed a 61 countries onThis brings the vacancy rate down to 12.1percent. Leasing was driven by various leases at lease for 292,956 square feet at 3301 Toy Road 6 continents in Groveport. The company is moving itsthe Techsouth facility. warehousing operation from 6300 Commerce United States: 125 Drive, where it leased 127,720 square feet. Canada: 38EAST Latin America: 18 Asia Pacific: 214The submarkets comprising eastern Columbus Looking forward to the fourth quarter, there are EMEA: 117are East and Licking County. Construction has signs of a continuation of third quarter’s strongwrapped up for the 500,000-square-foot Accel • $1.5 billion in annual revenue leasing. Exel Logistics received a tax credit tofacility at 9000 Smith’s Mill Road, New Albany. expand into a second operation at 2120 Creekside • 978.6 million square feet under management Parkway where they will employ 275 all told.New Albany’s industrial construction is prolific: • Over 12,500 professionalsVee Pak’s construction on a 105,000 square foot Pizzuti has begun construction on abuilding continues and is expected to finish in 150,000-square-foot facility for MBM in UNITED STATES:fourth quarter 2011. KDC, Quebec Ontario-based, Groveport at 2240 Creekside Parkway. Columbusis expected to complete its 240,000-square-foot Richard B. Schuen SIOR CCIMin spring 2012 and it will house 200 employees. SOUTH CEO | Principal | ColumbusAxium Plastics, Mississauga Canada-based, will The southern submarkets are Pickaway and 8800 Lyra Drivecomplete a 110,000-square-foot facility in spring Suite # 150 Fairfield counties. Both markets saw very little Columbus, Ohio 432402012 employing 165. Pizzuti has begun a movement this quarter and maintained their very TEL +1 614 410 5612speculative 303,000-square-foot building low vacancy rates.planned for spring 2012 with tenants AleneCandles and Jeye’s already signed on. Sonoco is SOUTHWEST Leslie Hobbscontructing a 120,000-square-foot facility and is Marketing and Research Manager The Southwest submarket added to last quartersexpected to be completion in 2012. 8800 Lyra Drive negative absorption of 117,548 square feet with Suite #150 roughly 60,000 square feet more of negative Columbus, Ohio, 43240Net absorption in the East was negative largely absorption. The largest vacancy was Valley TEL +1 614 410 5640due to Acatel-Lucent’s departure from 6200 Towing at 2200 Southwest Boulevard.Broad Street, leaving more than 400,000 squarefeet available. Jonathan Badgley WEST Research AnalystLicking county vacancy remained unchanged. 10 The submarkets on the west side of Franklin 175 South Third Street county are West, Madison, and Union. The West Suite # 285of the 11 properties with vacancies in Licking Columbus, Ohio 43201have vacancies of 50,000 square feet. These was the strongest performing sector with more TEL +1 614 437 4495contiguous spaces bode well for strong leasing than 600,000 square feet of net absorption. Leading leases were signed by Virginia BeverageNORTH Distribution for 155,720 at 3600 Sullivant Road and by Tarrier Foods which purchased theThe submarkets comprising the northern 152,800-square-foot 2700 International Street. This document/email has been prepared by ColliersColumbus are North and North Delaware. Both Union and Madison counties had negligible and International for advertising purposes. Collierssubmarkets lost a moderate amount of International statistics and data are audited annually and no change respectively. In Madison, the may result in revisions to previously reported quarterlyoccupancy 124,130 and 191,668 respectively. construction of Mars Petcare’s 1.3 million square and final year-end figures. Sources include Columbus Dispatch, Business First, Xceligent, and the Wall Street foot facility has been completed. Journal.SOUTHEASTThe Southeast submarket absorbed more than CSX formally announced what has been1.8 million square feet with net absorption of speculated, the firm will expand its intermodalmore than 1.6 million square feet. Genco leased distribution center in the west. The expansion ofmore than 250,000 square feet at 4555 $59 million will continue to bolster central Ohio’sCreekside Plaza; Midwest Express leased strong logistics position.135,000 square feet at 2160 Mcgaw Road; All Accelerating success.www.colliers.com/columbus

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