Dickman2012 Report

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Dickman Real Estate is pleased to present the Southeastern Wisconsin 2011 Year-End Industrial Market Report and our analysis on the data.

For the eight county area of Southeastern Wisconsin in 2011, we saw the overall vacancy rate decrease from 8.4% in Quarter 4 2010 to 7.5% in Quarter 4 2011. This occurred as the region experienced 3,073,242 Sq. Ft. of net positive absorption. While a tremendous amount of the positive absorption occurred in Milwaukee and Waukesha Counties, all of the counties except for Sheboygan experienced a positive trend in vacancy and absorption statistics.

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Dickman2012 Report

  1. 1. Southeastern Wisconsin 2011 Industrial Market ReportYear-End Statistics & Market Report Published February 2012 626 E. Wisconsin Avenue, Suite 1020 Milwaukee, Wisconsin 53202 Phone: (414) 271-6100 Fax: (414) 271-5125 Info@dickmanrealestate.com www.dickmanrealestate.com Page 1
  2. 2. Southeastern Wisconsin 2011 Industrial Market Report TABLE OF CONTENTS I. Market Trends & Forecast ………………………………………………………………….......... Page 3 Includes: 2011 Recap, 2012 Forecast II. 2010 vs 2011 Vacancy Rates vs. Absorption......…………………………………………....…… Page 5 Includes: Current Inventory, Q4 2010 vs. Q4 2011 Vacancy Rates & Absorption III. 2011 Quarterly Vacancy Rates..............................……………………………………………… Page 6 Includes: Current Inventory, 2011 Vacancy Rates IV. 2011 Market Statistics..........……………………………………………………………………… Page 7 Includes: 2010 vs. 2011 Vacancy by County Comparison, Quarterly Absorption vs. Vacancy, & Quarterly Vacancy vs. Asking Lease Rates JOIN OUR E-MAIL NEWSLETTER LIST! Sign up at www.dickmanrealestate.com to receive timely updates on new listings, completed transactions and other important announcements. 626 E. Wisconsin Ave, Suite 1020 Milwaukee, Wisconsin 53202 Phone: (414) 271-6100 Fax: (414) 271-5125 www.dickmanrealestate.comThis information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it.
  3. 3. Southeastern Wisconsin 2011 Industrial Market Report Milwaukee Industrial Market: All Signs Positive2011 Recap. Southeastern Wisconsin continued to over the next twelve months and perhaps a resurgence ofexperience positive quarterly absorption for a consecutive sixth speculative projects. Zilber Property Group announcedquarter with nearly 270,218 square feet absorbed in the 4th July 2011 their most recent industrial speculative building atquarter 2011 and 3,073,242 square feet absorbed in 2011. As LakeView Corporate Park in Pleasant Prairie. The 60,256a result of the positive absorption the vacancy rate has dropped square foot single or multi-tenant facility is expected to beto 7.5% in the 4th quarter 2011 from 8.4% in the 4th quarter completed by the end of this year.2010. (Source: Xceligent/CARW). HSA Commercial Inc recently signed a 63,838 square foot lease 2011 RecapMilwaukee and Waukesha counties were responsible for the at its park in Mount Pleasant Compared to 2010:positive absorption throughout 2011 accounting for nearly creating the potential for a new73% of the 3,073,242 square feet absorbed during the period. building to satisfy demand in 2012. VacancyKenosha and Racine counties both experienced positiveabsorption of 33,955 square feet and 533,945 square feet Since the second quarter 2011,respectively. While impressive, this data is less substantial than we have observed a significantprevious quarters that we have analyzed. Traditionally, Racine increase in the velocity of property DOWNand Kenosha counties compete for tenants that are crossing sales and completed leaseover from the Illinois border and will likely be the sites of the transactions for industrial product Net Absorptionnext speculative or build-to-suit developments in Southeastern throughout the SoutheasternWisconsin. Wisconsin region. Below is a sample of what we have seen over POSITIVELeasing and sales activity was substantial over the last two the past several months.quarters of 2011, and we expect these positive trends to carry Lease Ratesover into 2012. We have noted that quality industrial space isbeing depleted in many of the more popular submarkets southof I-94 and west of I-45. Natural tensions between qualitysupply and increasing demand are causing a stabilization of STABLElease rates that we have not seen for years (please refer toFigure 3 on Page 7). Scan the barcode TransactionsWe believe this pent up demand and dwindling supply of quality to learn more aboutproduct will result in a number of build-to-suit projects Available Dickman INCHING UP Properties Sample Completed Sale & Lease Transactions Building Address City Building Size Building Price Price/SF User or Investment 1 6101 N. 64th Street Milwaukee 374,736 SF $3,300,000 $8.80/SF Investment 2 1230 Cheyenne Avenue Grafton 86,000 SF $2,400,000 $27.90/SF Investment 3 1900 W. Cornell Street Milwaukee 243,056 SF $4,365,000 $17.81/SF User 4 11000 W. Heather Avenue Milwaukee 82,907 SF $3,450,000 $41.61/SF User 5 11225 W. Heather Avenue Milwaukee 95,500 SF $3,750,000 $39.26/SF Investment 6 690 W. Oakland Avenue Port Washington 182,000 SF $2,150,000 $11.81/SF User 7 N89 W14700 Patrita Drive Men. Falls 160,000 SF $5,300,000 $33.12/SF User 8 607 E. Polk Street Milwaukee 141,234 SF $3,750,000 $26.55/SF User - Teardown 9 6575-6693 N. Sidney Pl Glendale 104,400 SF $3,635,000 $34.81/SF Investment 626 E. Wisconsin Ave, Suite 1020 Milwaukee, Wisconsin 53202 Phone: (414) 271-6100 Fax: (414) 271-5125 www.dickmanrealestate.com Page 3This information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it.
  4. 4. Southeastern Wisconsin 2011 Industrial Market Report 2012 Forecast. The industrial real estate market for 2012 packages for tenants will also continue to become less looks positive. We observed numerous indicators such as aggressive. Previously, it was common to receive several decreased vacancy and lease rate and pricing stabilization months of free rent corresponding to the term of the lease. In across the industrial sector the industrial market, free rent is still prevalent but to a lesser over the past year. Despite the degree. Landlords prefer to give free rent in lieu of a lower 2012 Forecast positive news, absorption in Q4 lease rate in an effort to hold the line on property values. Compared to 2011: 2011 was 270,218 square feet compared to 1,150,904 square Based on the available data and our experience in the Vacancy feet in Q3 2011. We expect this marketplace we anticipate the year will have a strong volume lower rate of positive absorption of sales and leasing activity for industrial product. While to continue well into 2012. The challenges will remain in the Milwaukee marketplace the rate of deal velocity has slowed shifting supply and demand curves will have a notable impact INCHING DOWN for a variety of factors, including on pricing and potential new development in the short term. uncertainty locally (recalls), Net Absorption nationally (2012 Presidential election), and internationally (oil prices, Euro zone, Middle East). Coupled with this POSITIVE uncertainty is an unavailability The Industrial TOP 10 of 2011 of quality product in many In no order of importance! Lease Rates submarkets. Companies that are geographically driven will Here are some highlights of the industrial real estate find fewer options, conflicting market from 2011: with the general expectation STABLE among users for a “great deal”. 1. Highest Vacancy Rate: 12.2% in Ozaukee County Product inventory remains Transactions high for warehouse and flex 2. Lowest Vacancy Rate: 3.6% in Racine County space, but generally low for 3. Highest YTD Absorption: 1,297,083 Sq. Ft. in manufacturing facilities in the Milwaukee County region. 4. Lowest YTD Absorption: -301,500 Sq. Ft. in INCHING UP Sheboygan County Banks will continue to play 5. Milwaukee – the European manufacturing a part of the industrial real estate market as they dispose destination? We continue to see European firms of troubled properties. The properties sold by banks have take advantage of the attractive real estate pricing played a dampening effect on sales comparables, as the and labor pool in southeast Wisconsin. ultimate sale price is more correlated to the bank’s position 6. Progress on the Kenosha Chrysler Plant – After in the property than its true “market value”. On the lending much uncertainty, it appears the City of Kenosha side, we have found banks more eager to participate in will be taking over ownership of the property, user-based transactions, often coupled with SBA financing or potentially for re-development. other incentive packages from the government. 7. Only 11.5 Acres left (out of 56.5 Acres) in the Menomonee Valley. Leasing has played an important part in the industrial 8. Cap rates sank to their lowest levels in years real estate market recovery for southeastern Wisconsin. providing some relief to industrial investors. Ultimately stabilized lease rates can equate to a more stable 9. All 2011 regional manufacturing indices registered property value. Part of the problem we saw over the past growth, but new orders contracting. several years was higher vacancy and plummeting lease 10. Positive absorption of 400,000 SF+ every quarter rates. Creditors utilize these factors to determine property for 15+ months. value. With lease rates stabilizing in our region, property values will experience a similar result in 2012. Leasing 626 E. Wisconsin Ave, Suite 1020 Milwaukee, Wisconsin 53202 Phone: (414) 271-6100 Fax: (414) 271-5125 www.dickmanrealestate.com Page 4This information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it.
  5. 5. Southeastern Wisconsin 2011 Industrial Market Report 2010 vs. 2011 Vacancy & Absorption County/Submarket Inventory Total Vacancy Vacancy Absorption Absorption (SF) Vacant Q4 2010 Q4 2011 YTD 2010 YTD 2011 (SF) (%) (%) (SF) (SF) Milwaukee Downtown 12,040,175 1,615,925 12.5% 13.4% -72,565 -110,811 North Central 10,759,078 1,124,848 13.8% 10.5% 26,574 382,731 North Shore 7,604,171 993,990 15.0% 12.8% -97,426 192,647 Northwest 18,593,846 1,527,422 10.6% 8.2% 86,975 434,679 South 23,587,477 1,964,487 10.2% 7.9% 13,155 509,834 South Central 10,288,571 1,240,743 11.9% 12.1% 63,120 -19,052 West 12,408,380 1,171,276 9.7% 9.4% 78,700 161,800 Milwaukee Total 95,281,698 9,638,691 11.5% 10.0% 98,533 1,297,083 Waukesha Northeast 20,972,233 1,093,520 6.0% 5.2% -46,711 364,983 Northwest 17,789,574 823,643 7.2% 4.6% 136,434 503,658 Southeast 14,834,449 883,714 5.5% 5.7% 17,124 49,883 Southwest 15,796,684 729,493 4.5% 4.6% 41,751 29,967 Waukesha Total 69,392,940 3,530,370 5.8% 5.0% 148,598 948.491 Ozaukee 12,865,672 1,563,826 13.1% 12.2% 5,230 118,439 Racine 28,565,269 1,040,091 4.9% 3.6% 684,586 533,945 Sheboygan 12,760,606 826,314 4.1% 6.5% 0 -301,500 Kenosha 21,007,862 2,262,457 10.7% 10.7% 215,607 33,955 Walworth 8,789,087 377,886 7.3% 4.3% 6,680 261,617 Washington 19,345,294 1,073,246 6.0% 5.3% 265,453 181,212 Grand Total 268,008,428 20,312,881 8.4% 7.5% 1,424,687 3,073,242 Data Source: Xceligent Terminology Inventory - The total square feet of all single and multi-tenant industrial properties above 10,000 square feet. Vacant SF - Space that is available and not currently occupied. Vacancy Rate - Percentage of space in the market that is not currently occupied (Vacant square feet divided by inventory). Absorption - The rate at which rentable space is filled. Net absorption is equal to the amount occupied at the end of the period minus the amount occupied at the beginning of the period, taking into consideration space vacated during the period. 626 E. Wisconsin Ave, Suite 1020 Milwaukee, Wisconsin 53202 Phone: (414) 271-6100 Fax: (414) 271-5125 www.dickmanrealestate.com Page 5This information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it.
  6. 6. Southeastern Wisconsin 2011 Industrial Market Report 2011 Quarterly Vacancy Rates County/Submarket Inventory Total Vacancy Vacancy Vacancy Vacancy (SF) Vacant Q1 (%) Q2 (%) Q3 (%) Q4 (%) (SF) Milwaukee Downtown 12,040,175 1,615,925 12.5% 12.6% 13.1% 13.4% North Central 10,759,078 1,124,848 12.4% 11.9% 11.3% 10.5% North Shore 7,604,171 993,990 12.1% 12.9% 12.9% 12.8% Northwest 18,593,846 1,527,422 9.0% 8.7% 8.6% 8.2% South 23,587,477 1,964,487 8.6% 8.6% 8.1% 7.9% South Central 10,288,571 1,240,743 12.0% 12.4% 12.3% 12.1% West 12,408,380 1,171,276 9.4% 9.1% 6.7% 9.4% Milwaukee Total 9,638,691 12,527,649 10.4% 10.3% 9.9% 10.0% Waukesha Northeast 1,093,520 1,520,864 5.7% 5.7% 5.3% 6.0% Northwest 823,643 1,407,622 6.0% 5.2% 4.6% 7.2% Southeast 883,714 1,169,083 4.9% 4.9% 5.6% 5.5% Southwest 729,493 1,150,923 5.2% 5.2% 4.6% 4.5% Waukesha Total 3,530,370 5,248,492 5.5% 6.4% 5.3% 5.0% Ozaukee 1,563,826 1,746,344 14.1% 14.1% 12.5% 12.2% Racine 1,040,091 1,943,595 3.6% 3.6% 4.1% 3.6% Sheboygan 826,314 1,106,003 6.5% 6.5% 6.5% 6.5% Kenosha 2,262,457 2,603,463 10.8% 10.7% 10.6% 10.7% Walworth 377,886 476,643 6.7% 6.6% 6.4% 4.3% Washington 1,073,246 1,306,955 6.5% 6.5% 5.5% 5.3% Grand Total 268,008,428 20,312,881 8.0% 7.9% 7.6% 7.5% Data Source: Xceligent Terminology Inventory - The total square feet of all single and multi-tenant industrial properties above 10,000 square feet. Vacant SF - Space that is available and not currently occupied. Vacancy Rate - Percentage of space in the market that is not currently occupied (Vacant square feet divided by inventory). 626 E. Wisconsin Ave, Suite 1020 Milwaukee, Wisconsin 53202 Phone: (414) 271-6100 Fax: (414) 271-5125 www.dickmanrealestate.com Page 6This information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it.
  7. 7. Southeastern Wisconsin 2011 Industrial Market Report Figure 1: 2010 vs. 2011 Vacancy by County Comparison 13.1% 12.2% 11.5% 10.7% 10.7% 10.0% The side by side vacancy bar chart by 8.4% county shows a generally positive trend 7.5% 7.3% of declining vacancy between 2010 and 6.5% 6.0% 2010 2011. Markets west of I-45 and south of 5.8% 2011 4.9% 5.3% 5.0% I-94 outperformed the other markets. 4.1% 4.3% 3.6% Grand Total Kenosha Milwaukee Ozaukee Racine Sheboygan Walworth Washington Waukesha Figure 2: Quarterly Absorption vs. Vacancy 1,600,000 8.6% 1,400,000 8.4% 1,200,000 8.2% The data demonstrates a generally 1,000,000 8.0% positive trend of declining vacancy in 2011 800,000 7.8% with positive absorption in all four quarters 600,000 7.6% with a burst of positive absorption since mid-2011. 400,000 7.4% 200,000 7.2% 0 7.0% 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 Absorption Square Feet 1,424,687 1,430,370 245,853 1,150,904 270,218 Vacancy Rate (%) 8.4% 8.0% 7.9% 7.6% 7.5% Figure 3: Quarterly Vacancy vs. Asking Lease Rates 8.5% $5.50 8.3% 8.1% $5.00 The data demonstrates how vacancy 7.9% rates have steadily declined since Q4 7.7% $4.50 2010 while asking lease rates have held Total Vacancy Rate Asking Direct Lease Rate relatively steady. Despite stabilized asking 7.5% rates, modest landlord incentives such as free rent, lower base rent, and tenant 7.3% $4.00 improvement packages continued in 2011. 7.1% 6.9% $3.50 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 Total Vacancy Rate 8.4% 8.0% 7.9% 7.6% 7.5% Asking Direct Lease Rate $4.99 $4.96 $4.93 $4.90 $4.91 Data Source: Xceligent Milwaukee Industrial Market Report Q4 2011 626 E. Wisconsin Ave, Suite 1020 Milwaukee, Wisconsin 53202 Phone: (414) 271-6100 Fax: (414) 271-5125 www.dickmanrealestate.com Page 7This information has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it.
  8. 8. 626 E. Wisconsin Avenue, Suite 1020 Milwaukee, Wisconsin 53202 Phone: (414) 271-6100 Fax: (414) 271-5125 Info@dickmanrealestate.com www.dickmanrealestate.com Page 8

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