to occupy the new CenterPoint Intermodal
Center, a 1.6-million-square-foot BTS warehouse and distribution building in Joliet,
IL, which developers should finish in Q3.
In total, developers currently have 57
million square feet of industrial space
under construction. The Inland Empire
leads all markets with 6. 8 million, and
Dallas comes in second with 5. 8 million.
Zubel expects this wave of construction
to continue. “We have an undersupply of
class A space and developers have seen
this.” But most of this new space gets
snapped up once the builders have it ready
for lease, making room for even more con-
struction. “It’s really a question of absorp-
tion as we move forward,” he says.
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market in 2012’s last quarter, Jones Lang
LaSalle states that the vacancy rate dropped
20 basis points, “the largest drop in almost
two years.” Demand grew the most since
2008, with deliveries jumping and construc-
tion starts “popping up at a significantly
faster rate.” Most impressively, quarterly
absorption “rose dramatically” to 57. 3 mil-
lion square feet, “a gain more typical of the
pre-recession market.”
Markets with the highest absorption in
square feet were Chicago, with 6. 8 million;
the Inland Empire, 4. 6 million; and Dallas,
3. 3 million. Considering its small size,
Memphis scored perhaps the most impres-
sive gain, 2. 9 million, more than either
Houston or Los Angeles.
And the revival has begun having an
impact beyond kick starting new construc-
tion. The era of landlords having to entice
tenants into leases by making concessions
might not have ended yet, but there has
been a significant change since the dark days
of the recession. “In general,” Zubel says,
“corporations throughout the country, and
this includes Fortune 500 companies and
smaller, more local ones, are definitely more
confident about their business and there is a
trend toward signing longer leases.”
Tenants still retain some advantages.
The recession has left prices depressed in a
lot of areas, which means many prospective
renters eager to sign long leases want to
lock in lower rates. Tim Echemann of the
Ohio-based Industrial Property Brokers
works in a lot of the smaller markets in
Ohio and Indiana. He observes, “Ohio is
also seeing resurgence, but you can still
pick up great value.” He estimates that ten-
ants and buyers in some regions can pick
up property for 20% to 30% cheaper than
they could just five years ago.
Prologis says the national data show that
rents remain as much as 17% lower than
during prior peaks. However, the conditions
currently so favorable to tenants’ will start to
evaporate in the next few years. “Effective
rents are forecasted to rise 25% during 2013-
2016, as face rates rise 20% or more and
recessionary concessions burn off.”
And those lower prices haven’t stopped
landlords from doing deals. “I’m putting
more product out the door than ever,”
Echemann says about Findlay, one of the
industrial towns in Northeast Ohio where he
works. The buoyed automobile industry has
sustained many local industrial concerns,
and the town of about 42,000 also hosts large
employers like Marathon Petroleum and
Cooper Tire & Rubber Co. “Buildings have
gone up in industrial parks and filled up
with world-class companies.” He recently
signed Ohio Logistics, a company that pro-
