Warehouse space vanishing as fast as you can click Buy it

Warehouse space vanishing as fast as you can click Buy itWarehouse space vanishing as fast as you can click Buy it

Warehouse space vanished faster in 2016 than it ever has in the Chicago area, led by Amazon and other online retailers.

Industrial tenants absorbed an all-time high of 26.6 million square feet in the area last year, according to Seattle-based Colliers International. That more than offset 22.3 million square feet of new construction completed in 2016, the highest total in 11 years.

Overall vacancy fell to 6.7 percent in the fourth quarter, down from 6.8 percent in the previous period and 7.3 percent a year earlier. That's the lowest level of vacancy since the first quarter of 2001.

"This is about as good as it gets," said broker David Bercu, a principal in Colliers' Rosemont office. "We've got really strong demand, equilibrium between supply and demand, a healthy economy and no apparent indicators that things are going to slow down. What's really positive is that there is strength across all geographic areas of the market and all deal sizes."

Amazon continued to be a dominant force, signing the three largest leases of the fourth quarter. The Seattle-based e-commerce behemoth accounted for five of the 10 largest industrial leases in the area in 2016.

Warehouse space vanishing as fast as you can click Buy
Warehouse space vanishing as fast as you can click Buy

Its fourth-quarter deals included two in Aurora: 954,720 square feet at 1 Duke Parkway and 402,860 square feet at 4200 Ferry Road, both in Butterfield Corporate Park. The second-largest deal of the quarter was a 626,848-square-foot lease at 1750 Bridge Drive in Waukegan.

"Amazon is a beast," Bercu said. "Now that they've made a concerted effort to get into Illinois, they are absorbing space at a rapid pace.

"I think they've got their eyes on some other opportunities. They'll probably make a couple more deals (in 2017), but I don't think they'll be responsible for five of the 10 largest again."

Demand, as measured by net absorption—the change in the amount of occupied space compared with the previous period—was positive for the 19th consecutive quarter. Tenants gobbled up 7.1 million square feet during the fourth quarter.

The Chicago area has about 1.35 billion square feet of total warehouse space.

Developers are trying to line up new projects to meet demand. In some top markets, such as around O'Hare International Airport, sites are tough to come by, Bercu said.

"In and around O'Hare, the cost of land is getting back to 2007 pricing, which was the peak," he said. "Anything that's considered an infill location is achieving premium pricing."

Although there are no obvious factors that would slow the industrial market in 2017, President Donald Trump's saber-rattling on international trade bears watching, Bercu said.

"Our industry thrives on imports and imports," he said. "If there's less product coming into the United States and being shipped out, companies aren't going to have as much need for warehouse space. I don't think it's a major concern, but it's something we'll have to keep an eye on."

Commercial Real Estate Price Indices Post Fifth Straight Year of Growth

 

Q3 2016 Apartment Trends

  • The national vacancy rate for multifamily properties across Reis’s largest metro markets did not budge from it 4.4% in Q3 2016.
  • Close to 40,000 new units came online in Q3 2016.
  • Demand remained robust enough to absorb the amount of units that are coming online.
  • Asking and effective rents grew by 1%.
  • Year-over-year asking rents grew by 3.9% and effective rents grew by 3.8%.
  • Most expensive coastal markets' highest priced properties are showing weakness.

 

Q3 2016 Office Trends

  • The national office vacancies remained moored flat at 16% in Q2.
  • Year-over-year office vacancies have declined 40 basis points.
  • Rents began to accelerate but fell back to its average quarterly level at .4% respectively for both asking and effective rents.
  • Year-over-year rents are seem to be healthy, pulling at 2.7% and 2.8%.
  • U.S. economy creating fewer jobs than in 2015 and 2014.
  • Upcoming November elections a determining factor for firms holding off long-term commitments.

 

Q3 2016 Retail Trends

  • Regional malls showed some improvement with vacancies declining 10 basis points to 7.8%.
  • Relatively strong asking rent growth at 0.5%; between 0.3% and 0.5% on a quarterly average asking rent growth.
  • Neighborhood and community shopping centers vacancies rising by 10 basis points ending Q3 at 10%.
  • Asking and effective rents both grew by 0.4%
  • Businesses are pulling back on capital spending and long-term investments, waiting on results of upcoming elections.

 

Q3 2016 Industrial Trends

  • Warehouse and industrial subsector vacancies remained stuck at 10.5% in Q3.
  • Year-over-year vacancies for warehouse and distribution declined by 20 basis points.
  • Asking and effective rents grew by 0.4% and 0.5% respectively, growing 2.1%-2.3% on a year over year basis.
  • Flex/RD showed more activity in Q3, falling 20 basis points to 11.4%.
  • Year-over-year Flex/RD has declined by 70 basis points.
  • Asking and effective rents grew by 0.4%, year-over-year growth in the low 2% range.
  • 75,000,000 SF of new construction for warehouse and distribution for all of 2016.

 

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Source: Reis Nov 3, 2016

reis-apartments

Armageddon on Hold for Four Quarters

  • The national vacancy rate for multifamily remained moored at 4.4% in the third quarter, unchanged since the fourth quarter of 2015 despite the large number of new deliveries.
  • This confirms what we have posited thus far about demand remaining robust even as supply growth increases. With that said, this equilibrium is tenuous and likely won’t last.
  • For markets that experienced either a large increase in rents over the last few years, or a steady influx of new buildings – or both – landlord pricing power is being tested.
  • Market conditions in the apartment market softened a bit in the third quarter, a period they generally see the highest activity and strongest rent growth.

reis-office

On Pause, Those Fine Hopes for 2016

  • We started 2016 feeling fairly optimistic about the prospects of the office sector. With the national vacancy rate declining by 40 basis points last year, we were poised to finally see an acceleration in improvement in fundamentals for the office sector.
  • With national vacancies remaining stuck at 16.0% in the third quarter, it appears that optimistic hopes about the prospects of the office sector have been put on hold – at least till the fourth quarter.
  • While the numbers disappointed in the quarter, much of the decline was a lagged response to tepid employment and economic conditions in the first quarter.

reis-retail

Two Steps Forward, One Step Back

  • The national neighborhood and community center retail vacancy rate increased by 10 basis points during the third quarter to 10.0%; the retail mall vacancy rate decreased by 10 basis points to 7.8%.
  • Both minor changes represent a reversal in the second quarter when the neighborhood and community center vacancy rate decreased and retail mall vacancy increased, both by 10 basis points.
  • Neighborhood and community centers have lagged due to the slow growth in median household income that has kept a lid on discretionary spending over the last few years.
  • Both neighborhood and community centers and regional malls face competition from newer and fresher retail concepts as well as e-commerce.

reis-industrial

A Downshift in Demand

  • The momentum in the industrial market slowed a bit as demand growth decelerated. Nevertheless, vacancy held steady in the warehouse and distribution sector as net absorption exceeded new construction by a small margin.
  • Although the industrial sector has outperformed other property types in terms of occupancy growth, the down-shift observed in the third quarter puts the asset class on par with office and retail which followed a similar pattern.
  • Echoing the sentiment we expressed last quarter, the slow but steady rate of growth should continue going forward as most metros continue to see demand growth for industrial space.
  • Vacancy declined in the Flex/R&D subsector largely due to a sharp drop in new construction.
  • Net absorption slowed somewhat but remained positive. Market rents increased but also at moderate rates, similar to the second quarter.
  • Once again, every metro posted positive rent growth for the quarter, although some outperformed others.

reis-construction

New Construction at the Cusp of Economic Change

  • The third quarter of 2016 was marked by a somewhat consistent trend – a pronounced pullback in new completions, relative to recent quarters.
  • This is readily apparent in the apartment and office sectors, but less so in neighborhood and community shopping centers where supply growth has been anemic for several years anyway.
  • What caused this pullback – especially in multifamily where we were expecting a deluge in new supply?
  • Any pickup in activity for new completions is likely to be driven by projects that are already in the pipeline, just waiting to come online in what may well be a deluge for the apartment sector in the fourth quarter.

Source: REIS

Schaumburg Executive Office Flex Space For Lease

Schaumburg Executive Office Flex Space For LeaseIndustrial Property For Lease

Schaumburg Executive Office Flex Space For Lease

1300 Basswood Rd, Schaumburg, IL 60173

Total Space Available: 18,200 SF
Rental Rate: $10.50 - $12 /SF/Year
Min. Divisible: 8,200 SF
Property Type: Industrial
Property Sub-type: Flex Space
Building Size: 47,534 SF
Lot Size: 3.34 AC


Description

18,200 SF Flex-use space available for lease in Schaumburg ideally located just north of Golf Rd minutes from I-290 & I-90 offering ideal transportation N-S-E-W in the Chicagoland area from the NW suburbs. 8,200 SF of well-appointed executive offices currently configured with a welcoming reception area, 17 bright window lined glass-doored offices, spacious conference room, and four larger executive offices or additional conference rooms. 10,000 sf adjacent modern warehouse space offering 18'6" clear heights, two shared recessed truck docks, one grade-level door, 800a/480v 3p heavy power and fully heated and cooled. Office space may be leased separately, but warehouse space is only available if leased along with the office space.


Space Available: 18,200 SF
Rental Rate: $10.50 - $12 /SF/Year
Space Type: Flex Space
Additional Space Types: Creative/Loft
Min. Divisible: 8,200 SF
Lease Type: Industrial Gross
Date Available: Mar 2016
Lease Term: 60 Months
No. Parking Spaces: 150
Office SF: 8200 SF
No. Dock-High Doors/Loading: 2
No. Drive In / Grade-Level Doors: 1
Clear Ceiling Height: 19 ft.

Chicago Area Warehouse Vacancy Rates Drops to 12 Year Low

Chicago Area Warehouse Vacancy Rates Drops to 12 Year Low

Continued Demand for Warehouse/Distribution, Light Industrial Space Expected to Meet Supply Wave

Absorption of U.S. industrial real estate, which was fairly muted in the first three quarters of the year due to lack of new supply, is expected to end 2014 on a strong note as developers wrap up construction on an estimated 50 million square feet of new warehouse and light industrial space.

Demand wasn't red-hot for industrial property through the first nine months of 2014 by historic absorption levels, according to analysts presenting the CoStar Third Quarter Industrial Real Estate Review and Outlook. While demand for U.S. warehouse space has traditionally stepped up each quarter in previous years, 2014 has bucked the trend, posting consistent but relatively flat net absorption totals.

Look for leasing and absorption to spike in the last three months as dozens of new build-to-suit and speculative buildings open their bay doors before Dec. 31, CoStar Portfolio Strategy Real Estate Economist Donald Hall said.

"We expect to see a strong fourth quarter. One theory is vacancies have been so low, that there’s really no place for tenants to move into, particularly for newer space," Hall said. "If even half of the 50 million square feet of new deliveries expected is absorbed, absorption should be much higher in the current quarter, barring an unexpected scare in the economy."

Senior Real Estate Economist Shaw Lupton also noted that logistics construction is ramping up -- and more of it is being built on a speculative basis without any signed tenants in tow. Rising rents justify construction in most markets and developers have once again become confident enough to build on spec.

Today, the U.S. has around 100 million square feet of logistics under construction, more than half of it without signed sales or leases - and that figure remains about 30% below what Lupton believes is the market's potential based on the last cycle, which peaked in 2007.

The U.S. vacancy rate has fallen to 6.9%, edging below the same point in the last cycle, and rents are within about 0.8% of their long-term trend, prompting developers to warm up their bulldozers for more building as rents rise at a higher rate than replacement costs, Lupton said.

Rent growth is 3.4% year over year through the third quarter across both logistics and light manufacturing -- a very strong showing, albeit with significant performance differences between higher quality and less functional space. Rising rents are pushing construction beyond the main logistics and industrial hubs into the middle of the country, where land is cheaper and tenant costs are lower.

Source: CoStar Randyl Drummer November 5, 2014