Indianapolis industrial market strong as ever


by Dan Rafter

The Indianapolis industrial market’s boom times are far from over, at least according to the numbers released recently by Cushman & Wakefield.

The Indianapolis industrial market reached a record level of occupancy gains in the third quarter, according to Cushman & Wakefield. Cushman reported that the Indianpolis industrial market saw more than 3.4 million square feet of net absorption during the third quarter.

That brings the market’s year-to-date absorption to nearly 6.4 million square feet.

And don’t expect this market to slow any time soon.

“We expect net absorption to continue at a steady pace, as several sizeable industrial deals have been signed but have not yet taken occupancy,” said Trevor Kirsh, research analyst in Cushman & Wakefield’s Indianapolis office.

Cushman reported that the overall vacancy rate in the Indianapolis office market fell to 3.6 percent in the third quarter. The Southwest submarket ranked as the strongest, with 1.7 million square feet of net absorption. The Northwest submarket was strong, too, with 1.4 million square feet of net absorption.

As vacancy rates fall, rental rates are heading in the opposite direction. Cushman & Wakefield reported that average asking rents for Indianapolis-area industrial properties stood at $4.20 a square foot in the third quarter. That is up from an average of $4.09 in the third quarter of 2015.

For the future? Cushman & Wakefield said to expect “a flurry of construction to be delivered in the coming quarters,” as nearly 6.1 million square feet of industrial construction is underway in the Indianapolis market.

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Top five music videos in which commercial real estate plays a starring role

by Dan Rafter

Remember when MTV still played music videos? I do. And I remember, too, that there were plenty of those videos in which office towers, skyscrapers, grocery stores and other commercial real estate played a big role.

Sure, characters or monsters were often destroying this real estate, but that’s OK.

Here is a look at some of the all-time best starring — or supporting — roles played by commercial buildings in the coolest music videos out there (or at least the ones I like best.)

Elastica, Car Song

Don’t remember Elastica? That’s OK, they’re from the ’90s. But this charmingly goofy video was directed by Spike Jonze and features the band members driving through a sparkly and enchanting Tokyo as they chase ghosts. All those Japanese buildings look great!

Muse, Uprising

The real estate here doesn’t look as charming. It’s downright seedy, actually. But you can’t dispute that all those shops and water towers make a big impression when the giant Teddy bear starts knocking them down. Plus, the beginning of this song sounds a lot like the Dr. Who theme song, so that’s fun, too.

Los Campesinos, You! Me! Dancing!

Once again, the commercial real estate on display here is being destroyed, this time by space monsters. And, yes, this isn’t even Earth real estate, it’s outer-space properties. But this is an amazingly catchy song — once you get past the loooong intro — and I couldn’t fathom not including it here.

Fatboy Slim, Weapon of Choice

This video stars Christopher Walken dancing around an office building. What else could you want? If you can watch this real estate-centric video without smiling, you’re really having a bad day.

New Radicals, You Get What You Give

A quick warning: After watching this video, shot in the Staten Island Mall in New York City, you’ll definitely have this song stuck in your head the rest of the day. But that’s OK, it’s a great song. You might also get the urge to head to your local shopping mall. That’s OK, too — It could probably use your business.

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It’s not about Millennial vs. Boomer. It’s not about walls vs. benches

Dan Peterson

Dan Peterson

Guest post by Dan Peterson, Welsh & Colliers International

It’s time to remove focus from the age of employees and redirect it to the tools we give them.

Most current discussions about the trends shaping modern office space define themselves in terms of age first, purpose second. Does the space bring in younger workers? Does the floor plan promote collaboration (a word that may have been overused to the point of losing its meaning)? The pendulum keeps swinging from one trend to another based on the perceived preferences of the largest group of recruits or furniture styles at trendy, hip offices.

We are missing the big picture

In order to succeed, employees are dependent on interacting in both physical and digital spaces, regardless of age. We can learn to work in these environments so long as we acknowledge that to each-his-own and to his-own-each space. The workplace has expanded from one location to four. Because we now work in the office, in the home, on the go, and everywhere in the cloud, we better define ourselves by connections and access, not by age group and furniture design.

The connection economy we are now in depends on a transfer of labor and intellectual property among all generations. Many older workers provide business experience while the younger generation instinctively brings an adaptive acumen. People skills meet technology skills, patience meets urgency, and foundation meets fluidity.

Supporting access to the knowledge transfer is where a company should be focused.

Organic collaboration is what many office designs attempt to create, but unfortunately the execution is oftentimes less than ideal. Efforts focus on the extreme, and many companies either overshoot the concept or are too slow to adapt. Current office densification models should not be seen as the entire answer.

A collaborative workplace is just one element, and its significance shouldn’t be overstated. In fact, there is now evidence that a shared physical workplace environment can have a negative effect on human interactions. Headphones have replaced closed doors. Serendipitous productivity can be promoted at the modern water cooler and not by intruding the personal workspace. Boundaries erased are boundaries still desired. Collaboration can be more natural when options, not mandates (both physical space and technology tools), are given to the user.

Still, companies need to create a culture that promotes freedom and vibrant energy yet puts structure and accountability within the enterprise. The battle over which generation deserves the most attention in the workplace design should be a truce. The people we want working at our company will want the same things regardless of their age: aspiration, acknowledgment and autonomy. The right mix of real estate and technology will support the culture that ensures knowledge transfer, and inspiration will prevail.

What’s the solution? Listen to what motivates and empowers your people. Anticipate and test methods that will make them successful. Design your environments to be adaptive and sustainable.

Dan Peterson is Midwest director of the technology solutions group in the Minnetonka, Minnesota, office of Welsh and Colliers International.

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Haunted houses scaring up big business

by Dan Rafter

Turn on your radio this time of year and you’ll undoubtedly hear an advertisement for a haunted house in your area. Turns out, though, that haunted houses aren’t just fun. They’re big business, too.

According to America Haunts, which runs several of the haunted homes popping up across the country, there are more than 1,200 haunted attractions that charge admission fees during this time of year. At the same time, there are more than 300 amusement facilities, such as amusement parks or family fun centers, running their own versions of haunted attractions.

These haunted attractions are busy. America Haunts says that the typical haunted attraction averages about 8,000 paid guests. These attractions charge an average of $15 per customer.

But what about the money? America Haunts estimates that the haunted house industry generates from $300 million to $500 million dollars in ticket sales each year.

The HauntedHouse Association says that the entire Halloween attraction industry — which includes events such as pumpkin patches and amusement parks that transform their parks into haunted spaces — generates more than $1 billion in annual revenue. The association says that Halloween activities help many farmers from losing their farms.

Check out the video above if you’d like to see what all the fuss is about. It’s supposed to be one of the scariest haunted houses arund.

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E-commerce means big gains for industrial market


by Dan Rafter

E-commerce has had a major effect on the industrial market, and it’s largely been a positive one, according to the latest research from Marcus & Millichap.

In its latest national industrial research report, Marcus & Millichap said that the U.S. industrial vacancy rate feel to its lowest point in 16 years at the end of the second quarter of this year. The big driver? Marcus & Millichap pointed to gains in retail sales, a boost in residential construction and a steady performance from U.S. manufacturers.

But Marcus & Millichap said that retail sales are the biggest factor in an industrial upswing that is now in its seventh straight year.

And when you talk about retail, you have to mention, of course, Amazon.

Marcus & Millichap said that Amazon will be operating more than 70 fulfillment and sorting centers by the end of 2016, nearly two times the number the online giant ran in 2011. Amazon, then, continues to influence the warehouse and distribution decisions made by industrial users.

Other retailers — big names such as Walmart — are following suite. As they attract more online customers, these retailers are opening new warehouses closer to population centers so that they can deliver products as quickly as possible to as many customers as possible.

Marcus & Millichap says that in part to meet this demand from e-commerce, developers will complete industrial projects totaling 190 million square feet in the United States in 2016. Deliveries in major regional distribution hubs — such as Chicago — will account for more than half of the space delivered across the country this year, Marcus & Millichap said.

The U.S. industrial vacancy rate will fall 40 basis points this year, according to Marcus & Millichap, hitting 5.9 percent. The industry will see the net absorption of more than 200 million square feet during the year. Marcus & Millichap says that nearly 1.1 billion square feet of industrial space has been occupied since the vacancy rate peaked more than six years ago.

Posted in Chicago Commercial Real Estate, Illinois, Illinois real estate, industrial real estate, national commercial real estate | Tagged , , , , | Leave a comment

Amazon keeps tinkering with its warehouses. You should do the same

Brian Quigley

Brian Quigley

by Dan Rafter

Midwest Real Estate News asked Brian Quigley, executive vice president of Rosemont, Illinois-based Conor Commercial Real Estate, the big question: How is the growth of Amazon – which seems to open a new distribution center in the Midwest on a weekly basis these days — changing the transportation and logistics decisions that industrial users are making today?

Quigley had plenty to say about this.

Brian Quigley: Amazon and other e-commerce fulfillment companies continue to evolve and change the logistics environment requiring industrial developers such as Conor Commercial to also evolve and rethink how best to design industrial buildings to maximize functionality.

Amazon’s traditional warehouse facilities were sprawling 40-foot clear-height buildings located in far-flung locations, and those facilities would be filled with multiple work platforms and conveyor systems to house an enormous number of products.

The type of building that Amazon is targeting today is called the “Prime Hub,” and these facilities are located in the high-density residential areas of the city, in buildings with a lower clear height and much smaller footprint.  These are the type of facilities that will allow for same-day delivery of product and facilitate small route vans that are loaded with packages inside the facility rather than in large trucks loaded on docks outside the facility. These facilities stock only the high-turnover and high-value products that are best sellers specific to that particular neighborhood. These facilities cater to same-day delivery.

Amazon is in the process of defining specifications and a scope for its third-version warehouse called the “Sortation Center,” which focuses in on efficient small-package delivery, and is designed to reduce Amazon’s reliance on UPS and Fed Ex for deliveries.

The Sortation Centers will channel small parcels through the U.S. Postal system in presorted bundles by zip code. The USPS charges only a fraction of what UPS or Fed Ex charges for the same item. The purpose of this new facility is solely to reduce Amazon’s shipping costs. It currently spends 11 percent of its gross sales on delivery costs, which in total dollars is expected to be $11.5 billion in 2016. The goal of the sortation center is to reduce shipping costs by 12 percent to save $1.3 billion a year.

Midwest also asked Quigley about any other big trends he is seeing when it comes to the transportation and logistics decisions that companies are making.

Quigley: Companies involved in logistics are becoming more open to relocating to a new facility to save on transportation costs even if that means a disruption in their business and paying significantly more in rent.

Transportation companies are becoming more sophisticated in determining where to locate using evolving logistics software that predicts traffic patterns and bottlenecks.  The current trend with users is to engage consultants to perform transportation studies that determine the most efficient transportation routes based on multiple potential locations to identify the lowest-cost location from which to conduct business.

The rule of thumb is that transportation costs account for 50 percent of logistics costs, while real estate accounts for 5 percent, so there is a 10-to-1 ratio of transportation relative to real estate costs.  This means saving 10 percent on transportation while spending 10 percent more on real estate is not a break-even proposition. The math is 10 percent times 50 percent equals 5 percent total savings for transportation and 10 percent times 5 percent equals 0.5 percent more for real estate, a net savings of 4.5 percent in total.

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RENTCafe study: Apartment rents in Cleveland some of the most affordable in the country


by Dan Rafter

Renters looking for an affordable apartment unit in a big city might want to try Cleveland.

Despite the recent increase in retailers and restaurants opening in downtown Cleveland, renting an apartment unit in the city still remains relatively affordable, according to the September apartment market report from RENTCafe.

The average rent of a Cleveland apartment stood at $949 in September. That is down 0.4 percent from August and up just 2.3 percent from September in 2015. That 2.3 percent figure sets Cleveland apart as one of the U.S. cities with the slowest-growing monthly apartment rents.

Cleveland is definitely an outlier in the RENTCafe report. According to the company’s research, national apartment rents dropped 0.1 percent from August to September of this year. But even with that drop, the average national apartment rent jumped 4.7 percent from September of last year to the same month this year.

But while Cleveland definitely ranks in the affordable category, it is not the least expensive big city for renters in the RENTCafe report. That honor goes to Wichita, Kansas. RENTCafe found that the average cost to rent an apartment in the Kansas city hovers around $625 a month.

For comparison’s sake, that’s nearly seven times cheaper than Manhattan’s average monthly apartment rent of a whopping $4,083.

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