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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And in California's Inland Empire, manufacturers are taking space Vacancy Warehouse & Distribution Stats 15% 12 13 14 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Net Absorption SF 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 -25,000,000 -20,000,000 -15,000,000 -10,000,000 -5,000,000 0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Ef2.0%fective Rent Growth -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 Source: Reis as a more aff ordable alternative to properties in Los Angeles, where port-related demand keeps lease rates at a premium, reports Tony Guglielmo, CCIM, broker/owner of Allied Commercial Real Estate in Ontario, Calif. Challenged Markets Many markets that entered the recession with an overhang of space continue to struggle with weak demand and anemic rental rates. Lease rates are down 20 percent or more from their peak in Goshen, Ind., according to Steve Pettit, CCIM, senior associate broker at CB Richard Ellis|Bradley. In Columbus, Ohio, it is still a tenant's market due to a space glut, reports Kevin McGrath, CCIM, associate vice president at Cassidy Turley in that city. A chicken-and-egg dilemma is hampering industrial development in the Carolinas, brokers say. Both Brooke Gibson, CCIM, broker at Hart Corp. |International Industrial Real Estate in Charlotte, N.C., and Mike Ferrer, CCIM, vice president for industrial brokerage at Avison Young in Mount Pleasant, S.C., say there is a shortage of modern distribution space in their markets. Yet banks won't fund speculative construction to meet that need, and tenants are reluctant to commit to space before it is built. Atlanta may be hardest hit industrial market in the nation as it struggles with an oversupply and weak demand, says Rick Tumlin, CCIM, SIOR, senior partner at Lee & Associates in that market. Indeed, the recent uptick in industrial demand is a shadow of what it was in healthier years, with the number of retailers seeking industrial space down about 60 percent since 2008, according to Paul Waters, CCIM, SIOR, FRICS, executive managing director of industrial brokerage for the Americas at NAI Global in New York City. Waters works with major corporate end users of industrial space and currently is helping a discount retailer re-engineer its supply chain by developing a half-dozen large distribution centers around the country. Of the few corporations seeking industrial buildings, most prefer large, modern buildings measuring 450,000 sf to 1 million sf. "And in most cases, they're looking to build," Waters says, adding that compa- nies can take advantage of favorable market conditions to construct space that fi ts their needs exactly rather than adapt to existing digs in most markets. Waters doesn't paint a rosy picture for 2013, either, predicting that demand for space will continue near current levels until employ- ment improves and boosts consumer spending. "We need to put people back to work so they can buy things that retailers sell," he says. "People are expecting great changes aſt er the [November] election, but I don't see any change coming for industrial next year." But Doremus, the Reis analyst, is optimistic about 2013, trusting that once the markets move past the uncertainties of 2012, companies will adjust to conditions at home and abroad and make more real estate decisions. T at means absorption will accelerate, and rents will rise soon aſt er. Matt Hudgins is a real estate business writer based in Austin, Texas. 30 September | October | 2012 Commercial Investment Real Estate