Industrial market entering uncharted territory

industrial-buildingby Dan Rafter

The industrial market is booming across the Midwest, its performance ranking second only to the even busier multifamily market.

It’s little surprise, then, that individual markets across the Midwest are experiencing historically low vacancy rates and higher rental prices in the industrial sector.

Consider what is happening in Cincinnati as a prime example. According to the most recent numbers from Colliers International, the industrial market in the Cincinnati area has entered what the company calls uncharted territory. The industrial market here saw its vacancy rate fall to an historically low 4.2 percent by the middle of 2016. This rate has never been lower.

During the final two quarters of the year, 2.9 million square feet of new industrial inventory entered the Cincinnati market. But even with this addition, the area’s industrial vacancy rate rose only to 4.8 percent. Colliers says that this is still low by historical standards.

“There is a lack of supply in the market, and only recently did developers begin to respond to the rapidly shrinking inventory,” said Norm Khoury, brokerage senior vice president with Colliers International|Greater Cincinnati.

At the same time, asking rents for industrial properties in this Midwest market rose. Colliers reported that overall asking rental rates jumped 8.3 perent in 2016 to $3.97 a square foot. This increase was driven primarily by the bulk warehouse sector.

And Khoury had even more good news. He predicts that industrial lease rates and sales pries will continue to rise in 2017.

Not surprisingly, e-commerce and distribution centers drove the industrial market in 2016, not just in Cincinnati, of course, but across the entire country. These twin forces — online retailers need more distribution centers located in the center of the country — should continue to drive the market in 2017, according to Colliers’ predictions.

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