Industrial Insights: A Regional Roundup

In the July/August 2010 feature story “Industrial Wakes Up,” CCIMs discuss the sector’s slumbering performance and impending awakening. The following roundup of regional industrial markets in the U.S. gives voice to the valuable insights that could not be included in the article.


Jeff Castell, CCIM, SIOR

There’s limited demand for any industrial space; however, only 7.2 percent overall vacancy and no new spec construction during past 16 months are keeping the market in relative equilibrium. Capital is seeking product, but opportunities are limited opportunities due to the lingering gap in pricing expectations between sellers and buyers. In the event that Central Indiana experiences an uptick in demand and absorption, the market is likely to tighten in favor of landlords due to a lack of new product and declining vacancy, leading to firming and slightly higher rents during the second half of 2010 and early 2011.

Skip Duemeland, CCIM
Bismarck, N.D.

The future is bright in Bismarck as the industrial leasing market has picked up strongly in the past two years. Flex spaces in particular are moving, sometimes with two lessees bidding on the same property. Fortune 500 companies and international businesses, such as Hess Corp., a South Korean packing operation, and several wind power companies, are leasing space throughout the state. We are very fortunate, as each of these companies is bringing 40 to 300 manufacturing jobs to the area.

Tim Strange, CCIM, SIOR
Oklahoma City

The Oklahoma City industrial market has remained resilient when compared to other product types locally and when compared to the rest of the nation. Our market is currently approximately 89 percent occupied, with a majority of our vacancy coming from buildings with more than 100,000 sf of vacancy. The current demand is soft, but we are not seeing a wave of tenants leaving our market.

We have not seen a lot of investment properties brought to market recently due to the uncertainty of where the market is headed. The properties that have come to market with strong tenants have traded hands to either local investors or out-of-state investors that currently own property in this market. Any quality vacant buildings that have been put on the market are getting a lot of interest from users because of available SBA financing.

The owner-user market will continue to be strong as long as they can find suitable product and secure inexpensive SBA financing. Since our market has been so stable, I expect local and regional owners to continue their search for stable properties with strong tenants. I do not think we will see a large wave of distressed properties, so investors who are seeking a deep discount for non-performing assets will not be taking a hard look at Oklahoma City industrial properties.


Scott K. Perkins, CCIM, SIOR
Hackensack, N.J.

The properties that are trading are those that have some cash flow. Even buildings with short-term leases are trading. The thought is to muddle through the next two years with a property that was bought at a bargain price. The hope is that in two years the leasing market will be much healthier.

Supply is definitely outstripping demand in the warehouse-distribution market. There seems to be a lot of money sitting on the sidelines. There are older funds and newly formed funds waiting to pounce on the “deal of the century.” These deals have not materialized.


Chase Monroe, CCIM, SIOR
Charlotte, N.C.

On the leasing front, demand is picking up slightly. It’s certainly up from this same time in 2009. There is still plenty of supply to be leased up, but there is zero new construction and none on the immediate horizon. On the investment side, we are seeing some transactions and capital trickle back into the market.

Charlotte and the state of North Carolina are growth markets. People want to live here. In the long term, industrial will be a solid investment. The recent diversification in our local economy will bode well for the region over the long haul.

David Murphy, CCIM, MAI, SIOR
Orlando, Fla.

In Central Florida, class A, institutional grade industrial facilities with stabilized occupancy are actually in high demand. However, the demand for non-core, class B or C product with some vacancy has gone away. Only the most opportunistic investors are looking at properties with vacancy issues, and they had better be well-capitalized because arranging funding for non-stabilized industrial assets is extremely difficult.

I believe Orlando is on sale right now at a discount. The dynamics that have made Central Florida an attractive area for industrial users, including tourism, a large convention center, a burgeoning medical research community, and quality of life, remain intact. The industrial sector is not tied as closely to job growth as some of the other property types, and we could see a relatively robust improvement if overall economic conditions improve. Developers were much more disciplined in this cycle as compared to previous downturns, so we do not face an oversupply situation. If the market improves quickly, we could see some dramatic improvement in our vacancy numbers.

Lee Y. Wheeler III, CCIM
Beaumont, Texas

Supply is down mainly due to two major hurricanes hitting our area. There is a need for more industrial development, but it is hindered by the current lending environment. Demand is up for smaller (below 10,000-sf) product but down for larger stuff.

Most investors are buying only occupied and stabilized properties right now due to the lack of access to capital. Almost all of them are individuals or small partnerships.

If the lenders start lending, I see some development on the horizon to reduce the gap between supply and demand.

Richard Whitney, CCIM, CPM, SIOR
Asheville, N.C.

Western North Carolina has a hard time competing with nearby areas for the large, heavy industrial prospects. Our land prices are high, as are our site prep and construction costs. However, we are hoping to capture the next wave of technology.

Unbeknownst to most people our POP provides the fastest data transfer between Atlanta and Washington D.C. We are competing to bring Google's latest high-speed technology to the area. If that happens, it will change our area forever.

As for leasing, the current environment is all about damage control. My advice is to do whatever needs to be done to keep the lights on. Make every deal you possible can, no matter how painful. If you lose a tenant, the rent loss associated with the downtime, the cost of upfit for a new tenant, and the operating costs absorbed by the landlord during the vacant period will total far more than the cost of swallowing hard and leasing space at prices that may seem way too low. At least you will have some rent coming in, and the tenant will be paying the operating costs. Also, the tenant will be in your building and not in someone else's the next time they need to renew, and that in itself is a big advantage.


Jim Smith, CCIM, SIOR
Albuquerque, N.M.

In the Albuquerque market, not much is trading other than owner-user industrial properties. Owner–users have used SBA financing to purchase properties that have become vacant as previous users have downsized and/or left the market. Though the local community college did buy a distressed industrial property directly from the lender.

Demand is weak, and while vacancy is up -- almost double the rate from 3 years ago -- supply is still tight. Albuquerque is a relatively small market, and it seems as though quite a bit of the vacant space has significant functional obsolescence and just does not fit the needs of tenants in the market. The more you know about what you want, the harder it is to find!

Our local CCIM chapter is sponsoring a presentation by an IREM member that will focus on how competent property management can keep operating expenses in line without sacrificing care of the asset in order to maintain or achieve competitive occupancy costs. This is the key in keeping vacancy as low as possible.


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