Browse Category: Industrial

Amazon’s New Air Hub: A Look At Cincinnati’s Industrial Market

Amazon’s latest step in its apparent plan to take over its own supply chain is an announced $1.5B cargo hub outside of Cincinnati. The hub, slated to be placed in Cincinnati/Northern Kentucky Airport (CVG) is expected to enable the company to fly its Amazon Prime cargo jet fleet into and out of a healthy property market blessed with what Amazon’s SVP of Worldwide Operations Dave Clark called “a large, skilled workforce, centralized location with great connectivity to our nearby fulfillment locations and an excellent quality of living for employees.”

Construction of the facility is sure to have some follow-on effects as vendors and customers consider the Airport submarket’s nearly 31 million sf of inventory.  A recent arrival of new space allows plenty of options, boosting total vacant space to 1.4 million. Here’s a quick look at Queen City’s market as published this week in Xceligent’s 4Q2016 Cincinnati Industrial Market Report:

  • During 4Q 2016 the industrial market has absorbed just over 538,504 square feet (sf), with a year to date absorption of just over 5.2M sf.
  • As a result of just over 4.6 million sf of newly delivered space, industrial vacancy has risen from 3.7% in 2Q 2016 to 4.3%.
  • The Tri-County submarket has posted the highest positive net absorption for two consecutive quarters, closing 4Q 2016 with just over 676,000 sf. This positive movement was offset by the Airport submarket which posted a negative net total of 750,000 sf.
  • The weighted average asking rent has increased year over year from $3.56 per square foot (psf) to $3.96 psf. This increase can be attributed to an increased demand with limited warehouse availability.

Industrial Property Search: CVG Airport Cincinnati

Click here to take a look at live property data centered on CVG Airport/Covington at CommercialSearch.com.

Taking To The Skies

The location choice of CVG Airport by Amazon has the company striking while the iron is hot; the airport itself has been the beneficiary of ready warehouse inventory nearby. Its growth in freight handling has been in the double digits year-over-year for the last five years. If the extra freight loads Amazon represents seems a good fit for an airport with a record of expanding capacity in a sustained push, that may be part of the company’s interest in taking to the air: their designs for floating warehouses and plans for drone delivery are far more likely to arrive than it might at first seem. If there’s one thing Amazon does, it’s deliver.

Third Party Logistics (3PL): Video Refresher

The industrial property subcategory 3PL, or third party logistics, is a rapidly expanding market across the US.  Steady growth in e-commerce has created a growing dependency upon these warehousing and logistics properties thanks to their effect of reducing delivery time on goods shipped to customers. With e-commerce sales worldwide set to pass $2 trillion in 2017 in pursuit of double-digit annual growth, knowledge of the 3PL industry will pay off for the commercial real estate professional patrolling this piece of the national supply chain. What follows in this post are two helpful sources of quick information about the 3PL as it lives and breathes today.

 

Video: Dynamic 3PL Logistics

If you’re in need of a rapid refresher on the global supply chain and need a helpful glimpse at the shape and vocabulary of 3PL, check out this short video by 3PL provider Dynamic 3PL Logistics.  To the point, short, yet packed with illuminating info, this clip will get the point across about 3PL — fast.

Fifty Most Successful 3PLs

While far from a comprehensive or updated list, the article “North America’s 50 Most Successful 3PLs” from SupplyChainBrain.com collects an excellent top-down view of North America’s top 50 3PL operators, including some depth on the operations, local and global. Researchers arriving to this market will find a useful bookmark here.

 

Atlanta’s Thriving Industrial Property Market Attracts Adidas

English: Seal of Atlanta.
Seal of Atlanta. (Photo credit: Wikipedia)

Xceligent’s most recent report on Atlanta’s industrial property market (download the Atlanta 2Q Industrial Market Report PDF here) is packed with great news for the property business – falling unemployment, high absorption, sliding vacancy rates, and a strong record of adding industrial-using jobs with almost 24,000 added year-over-year.

New Speedfactory To Set Foot In Cherokee County

The industrial growth in Atlanta metro is strong enough to compel international shoemaker Adidas to locate its newest factory there rather than Asia. A milestone in both local development and industrial automation, the “Speedfactory” headed for the Cherokee County / I-575 area northwest of Atlanta mirrors a similar Adidas facility running in Germany. The new factory is expected to produce 50,000 pairs of shoes per year while employing 160 workers.

3D Printing, Robots and Rap

The Speedfactory design is the result of a successful pilot program run by the company last year that relies heavily on technology and recycling to get the job done. 3D printers and automated manufacturing will meet with recycled polyester and plastic to produce shoes near to consumers in the US market. Boosting sales in the US is a major goal of the company, which has welcomed the recent endorsement of rapper Kanye West to reattach the elusive characteristic of “cool” to the brand, perhaps lost since the 1980s heyday of early rappers Run-DMC.

At 70,000 SF, the new Adidas project joins 2.5 million SF of light industrial inventory online as of 2Q in Atlanta’s Cherokee County area. The suburb’s light industrial space has seen a minor negative absorption in 2Q16, with 4,400 SF of space newly available from Jan 1.

The new Speedfactory is scheduled to open in the second half of 2017. Download a PDF of Xceligent’s Atlanta 2Q2016 Industrial Market Report here.

 

Motor City Starts Up Again: Detroit Industrial Vacancy Falls To 6%

Detroit’s industrial real estate past is a story of too many eggs in one economic basket.  When the over-concentration of auto industry capital fled Detroit, the communities that capital once sustained vanished, and the rest is rust belt history.

But the fact is the auto industry didn’t vanish entirely. Today, strong demand in auto sales pushes Detroit and its suburbs toward an industrial output that represents a giant step toward long-missing sustainability.  Robert Carr’s piece in NREI:

“You can’t find a lower vacancy rate in Detroit in the past 20 years,” [notes John DeGroot, research manager at real estate services firm NGKF]. “A big part of it is auto sales. The average yearly sales mark for the Big Three was around 16 million since 2002. During the recession we saw it dip to 10 million, but now we’re hitting 17.5 million per year.” Auto experts predict that figure will continue in 2016.

Typically, the suburbs around Detroit have fared better with industrial leasing and construction, with I-75/Auburn Hills, Macomb county and Western/Southern Wayne county being the preferred locations for new, modern facilities. However, though Detroit proper has many obsolete or dilapidated industrial buildings, the city is now a major draw for new construction as well, DeGroot says. Since 2015, the city has seen more than 765,000 sq. ft. of new construction completed, according to a second quarter NGKF report.

More from NGKF on the specific projects and locations in Detroit’s long path to industrial recovery:

Increased industrial demand in the city of Detroit continues to drive new construction of modern [facilities]. Much of the city’s existing inventory suffers from a form of functional obsolescence and/or physical deterioration and difficult to find users to absorb. Since 2015, the city has seen over 765,000 square feet of new construction completed. Auto supplier Flex-N-Gate is the latest company to make a significant investment in the city. The company recently announced plans to build a 500,000-square-foot production and sequencing facility on a 30-acre site in the industrial park located near Interstate 75 and I-94. Meanwhile, Lear Corporation is in the planning stages of building a new manufacturing plant in the I-94 Industrial Park. These planned upcoming developments follow the 904,000 square feet that is currently under construction, which include: Crown Enterprises’ 500,000-square-foot distribution facility for its Universal Truckload Services; YFS Automotive Systems Inc.’s 150,000-square-foot manufacturing facility; and Sakthi Automotive’s 540,000-square-foot expansion on Fort Street.

Adaptive Reuse: From Newspaper Printing Plant To Data Center

picture of QTS Chicago data center
QTS Chicago Data Center.

Gail Kalinoski’s piece in Commercial Property Executive focuses on a big adaptive reuse story in Chicago. At 317,000 SF, the Chicago Sun-Times newspaper built for the future, but not the future of newsprint.  Its printing presses fell largely silent and its need for logistics fell away as demand for daily news printed on paper was obliterated by the world wide web.

Built in 1999 and shuttered twelve years later, the facility is seeing new economic life ironically by giving shelter to the very technology that closed the property at first. The plant is now a thriving data center, still dedicated to distributing information, albeit bits and bytes.

Owned by QTS Realty Trust, an international operator of data centers, the building went through a reported $80M retrofit to make the conversion from distributor of dead trees to modern computing marvel:

The first phase has been completed and features 48,000 square feet of raised floor and associated critical power. When fully developed, the building will support a total of 133,000 square feet of raised floor encompassing 24 megawatts of power. QTS said it has the ability to add 213,000 square feet of raised floor and 32 megawatts in Building 2 for a total of 346,000 square feet of raised floor and 56 megawatts of power within the campus at 2800 S. Ashland Ave.

The company is planning an open house on July 15 to showcase the Phase One completion.

“We are pleased to formally open our new Chicago data center that extends our platform delivering a broad selection of integrated IT infrastructure services for Chicago and nationally,” Dan Bennewitz, COO of sales and marketing at QTS, said in a prepared statement. “We are focused on a collaborative, high-touch enterprise approach serving the dynamic needs of today’s agile enterprises seeking a partner that can right-size flexible and scalable IT solutions for today and tomorrow.”

Colliers: US Industrial Vacancy Lowest In A Decade

q1-colliers-industrial-market-outlook

The newest US Industrial Outlook from Colliers puts Q1 2016 in its sights.  Bottom line: the news is good.  Q1 shows the lowest national industrial vacancy rate in over a decade.  Decline in industrial vacancy marked its 22nd consecutive quarter to arrive at 6.3%, which is 70 basis points lower than this time last year.

Although new construction is on the rise, the demand still outpaces new supply.  According to Colliers, construction completions added up to 60.1 million square feet of new supply in 1Q 2016, adding up to a near-record 0.40% of total inventory.  At the same time, 63.8 MSF of industrial space was absorbed, logging an eye-popping 9.6% increase over this time last year.

You can download a free copy of the information-packed report from Colliers “US Industrial Market Healthy Despite Headwinds” after the link.

Subtropolis: Going Underground in KC

Imagine: six million (and counting) square feet of warehouse space, with a mind-boggling potential for fourteen million. A location central to the US. And climate that never strays from 65-71 degrees Fahrenheit.

There’s only one catch: it’s 100 feet underground.

Welcome to Subtropolis, the commercial space under Kansas City, MO that started as limestone mines and has since developed into a logistics and storage solution for 53 businesses employing over 1,700.  Tenants include the US Postal Service, a film cold storage facility housing reels of “Gone With The Wind” and “The Wizard Of Oz”, as well as a University leasing out classrooms.  The complex got going in the 1950s when its first tenant – a NASA scientist seeking controlled conditions to test equipment – moved in.

Check out Subropolis’s site here.  And enjoy the coverage by Kansas City channel 41 News.

It sure gives a whole different meaning to the term “underground economy”.

 

Study: Building Inland Port Might Drive Industrial Property Value

Images of UTC study web page

The Urban Transportation Center at the University of Illinois at Chicago released a study this year that suggests the construction of an inland port may have driven industrial property value higher along its service area.

The April study looked at areas along high capacity trucking highways in Will County, Illinois, centered upon a development of an inland port or Intermodal Logistics Center (ILC) in Elwood, IL, a town south of Joliet.*

The report, “Intermodal Logistics Centers and Their Impact on Transportation Corridor Industrial Property Value,” was completed by researchers at the Urban Transportation Center (UTC) at the University of Illinois at Chicago.

Researchers used tax assessment, truck volume and U.S. census data from 2002 to 2007 to analyze patterns and property value changes of industrial property along trucking and waterway corridors close to CenterPoint, a master-planned inland port located on 6,500 acres 40 miles southwest of Chicago. Located in Elwood, CenterPoint was built between 2000 and 2002 with tax increment financing from the Village.

Those roadways studied as part of a treatment group showed an increase in equalized assessed value (EAV) per square foot by $0.25 over properties studied in a control group. The treatment group, located on the west side of Will County, was comprised of properties on or near Interstate 55, Interstate 80, State Route 53, and a waterway — the Des Plaines River/Chicago Sanitary Ship Canal. Properties studied in the control group, located on the eastern side of the county, were on or near Interstate 57, State Route 50 and U.S. Route 45.

Caveats

The study, while finding a correlation between the construction of the ILC and the nearby bump in property values may not have uncovered a cause — the researchers note that it’s possible that speculation in industrial property in the time leading up to the ILC’s construction might be responsible.  Additionally, in Illinois, studies of assessments means studying a number called EAV, or equalized assessed value, a multiplier that fluctuates values in an attempt to more tightly bind market value to tax levy calculation.

Capturing Value

Also mentioned in the full study’s (available here) summary: the economic benefit of techniques of value capture – where special taxes or predetermined grants from developers are used to fund developments that are shown to produce economic benefit.

“In accordance with these findings, planners should consider value capture tools along trucking corridors,” the report stated. “Increases in industrial property value [should be] considered with projects that [involve intermodal logistics centers].”

* Fans of the 1980 film The Blues Brothers will no doubt recognize these town names as those of Joliet Jake and Elwood Blues.

 

Demand For Airport Real Estate Takes Off

 

A recent acquisition by a Chicago RE investment firm of Austin, TX airport industrial buildings shows one way to play the US infrastructure slowdown.

Relative to other countries where airport capacity continues to expand, including Canada, Singapore and Germany, US airport property expansion is flat.  A The 2014 report by British consulting firm Skytrax indicates the ten best airports in the world are all located outside the United States. Reports like this tend to underscore what we can see with our own (red) eyes as we drag our luggage through our nation’s airports: outdated, dingy terminals, wretched parking and insufficient access.

The scarcity of new airports has attracted an interesting investment strategy: buying logistics buildings in these airports is a classic example of money following a tight supply. That’s the thinking behind Origin Capital Partners recent snapping up of five industrial properties in Austin’s Bergstrom International Airport.  WSJ’s Barbara Dellolis writes:

Bryan Sullivan, a director of acquisitions at Origin, said the company ventured into the airport space because it sees limited competition, rising demand and constrained supply. The buildings have direct access to the tarmac at a time when the airport’s cargo shipments have been steadily growing due to rising e-commerce and international shipping.

The Origin deal highlights the value investors are placing on airport real estate.

“The investors are playing where they’re not making that much product anymore,” said Tom Kirschbraun, international director with JLL’s Capital Markets. “If they’re buying property on an airport, there’s going to be appreciation of consequence in controlling that kind of real estate.”

Industrial-property rents rise in proportion to airport proximity, Mr. Kirschbraun said. At Chicago O’Hare airport, for instance, “there’s a 30% increase in rent [for buildings] immediately around the airport,” he said.

Most airports are owned by municipal governments, which rent out gates and hangars to airlines, and storefront space inside to retailers, restaurant operators and other concessionaires. On the edges of the airport property, many airports also lease the grounds to private companies, which develop warehouse buildings to rent to airlines and cargo-logistics and handling companies. After the ground lease expires, the property reverts back to the airport.

Acquiring airport industrial property can let you ride the tail of the e-commerce rocket in a whole new way.  Something to consider while you’re stuck on the taxiway.  Again.

 

 

Industrial Market: Hotter Than You Think?

I’ve been a fan of Michael Bull’s Commercial Real Estate show for more than a year.  I spotted this clip last year and made a note to blog it here, but managed to not follow up sooner than now.  What triggered my memory was the appearance on this episode of Brian Cardoza from Prologis, whose firm is dedicated to research on the industrial sector.

In this clip, you can get a sense of how focusing on value in industrial property can cause upward pressure on rents and absorption, and how such a shift works even as a buyer’s market persists.