Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
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Grand Rapids, Mich. T e most active leasing activity of late has involved manufacturers of food and specialized automotive parts, but makers of pharmaceuticals and other specialized, low-volume products are also taking space. "We're in a crazy situation here — we are out of inventory and we have very strong demand for space," Suwyn says. In July, one of Suwyn's clients received fi nal approval to develop an 85,000-sf structure for light manufacturing and distribution uses in Kentwood, Mich., in a build-to-suit for an undisclosed user. "T at will be the fi rst new standalone industrial construction we've seen in years," he says. A Nation Recovers T e Midwest is perhaps the brightest spot among industrial markets in 2012, but it isn't alone. T e U.S. industrial market showed marked strength at midyear, with a net 22.5 million sf of space absorbed by tenants in the second quarter, according to New York-based research fi rm Reis. T e national vacancy rate ended the quarter at 13 percent, down 30 basis points from the fi rst quarter and down 80 basis points from a year earlier. "The second quarter was the strongest quarter we've seen in the past year," says Brad Doremus, Reis' senior analyst. "Rents were also the highest we've seen them grow since one year ago as well." Asking annual industrial rent averaged $5.35 psf in the second quarter and was up Realty Group in Indianapolis. Historically, the market's vacancy rate has averaged about 14 percent. "We are at an unprecedented low vacancy rate in that modern bulk space," Woods says. T e tight market stems from a banner leasing year in 2008, when the market absorbed about 8 million sf of industrial space at the same time that speculative construction came to a halt. Absorption has continued to eat away at available space ever since, as companies have taken Indianapolis buildings in order to consolidate their supply chains and reduce costs, Woods says. What is Indianapolis' secret to success? In addition to the city's geographic advantage for supply chain hubs, recently passed right- to-work legislation has increased Indiana's appeal to corporate users seeking aff ordable skilled workers, Castell says. T e availability of non-union, skilled labor is also helping to drive demand for manufacturing space in western Michigan, says Duke Suwyn, CCIM, SIOR, president and CEO of Colliers International in 28 September | October | 2012 0.5 percent from the fi rst quarter, Reis reports. Eff ective rent, which factors in incentives, was $4.81 psf, up 0.6 percent from the previous quarter. "Incentives have started to tighten, which is a good sign for owners," Doremus says. He attributes the healthy occupancy numbers in part to a remark- ably small supply of new construction in the pipeline. Developers delivered just 2.3 million sf of industrial space in the second quarter, down from 2.5 million sf in the fi rst quarter. "We're seeing some of the lowest construction fi gures we have ever seen," he says. Industrial Hot Spots Manufacturing and a resurgent automotive industry is fueling leas- ing activity in the Midwest, Doremus confi rms, and seaport activity is driving up occupancy and rental rates all along the West Coast. Absorption is increasing in the Mid-Atlantic markets of Atlanta and Raleigh/Durham, N.C., and even in Tampa, Fla., all of which may Commercial Investment Real Estate Varie/Corbis