Commercial Investment Real Estate September/October 2017 | Página 27
The
industrial market is rid-
ing the coattails of explosive growth occurring in
the e-commerce sector. But while e-commerce
may be grabbing the spotlight and stealing the
show, a much bigger supporting cast of industries
is helping to power this expansion.
E-commerce certainly deserves top billing for its
role in not only fueling demand for space, but for
spurring transformative change across the entire
supply chain of modern distribution and fulfill-
ment centers. This includes central hub locations
that are within easy reach of both workers and the
last mile of customer delivery.
“The primary driver of industrial development
has been the e-commerce sector in the Cincinnati
and Columbus [Ohio] markets,” says Loren M.
DeFilippo, CCIM, director of research | Ohio
for Colliers International in Cincinnati. “Demand
for modern Class A logistics facilities has driven
vacancy rates to historically low levels.”
The Cincinnati metro area reported an overall
industrial vacancy rate of 3.5 percent in first quar-
ter 2017, with more strong demand ahead. Earlier
this year, Amazon announced that it had signed
an agreement with the Cincinnati/Northern
Kentucky International Airport, and the online
behemoth plans to invest $1.5 billion to create a
Prime Air cargo hub that will include a 3 million-
square-foot distribution facility and 350,000-sf
loading wing, as well as creating 2,000 jobs. That
hub is expected to attract more online retailers to
the region, DeFilippo adds.
E-commerce, distribution, and third-party
logistics continue to dominate the national indus-
trial market, accounting for about 25 percent of
all leasing activity, according to JLL. However,
the lion’s share of activity — the other 75 percent
— is widespread across many sectors from medical
device manufacturing to food processing.
“As a general take on things, the economy tends
to be in a pretty good place, and a lot of businesses
are benefiting from that,” says Ryan Severino, chief
economist at JLL. GDP has been growing at a
rate of 1.5 to 2 percent, and consumer spending
remains healthy.
“I usually take the temperature of the confi-
dence level of the principals of the company,
and people are more optimistic,” adds Arnold
Ng, CCIM, president of Apex Commercial
Real Estate in Torrance, Calif. “They are not as
resistant to expanding. They are willing to take
on more risk, and people are being a little more
aggressive in making moves.”
Industrial is outperforming other property
types for vacancies and rent growth, and the lat-
est forecast from the Spring 2017 ULI Consensus
Forecast remains positive. Industrial vacancies
are expected to improve 20 basis points to reach
8 percent by year-end, where it will hold steady in
2018 before climbing slightly to 8.4 percent by the
end of 2019. Rent growth for industrial is expected
to slow after peaking at 6.6 percent in 2016, but
remain above the expected rate of inflation at 4.6
percent in 2017, 3.8 percent in 2018, and 3 percent
in 2019, according to the ULI report.
Solid Foundation
Consumer spending is a big piece of the U.S.
economy — a lynchpin in the demand for indus-
trial space. It is important to note that despite
the explosive growth of e-commerce, nearly 90
percent of all sales are still occurring within
brick-and-mortar stores, according to Severino.
Regardless of whether consumers are shop-
ping online or in stores, that spending is fuel-
ing activity all through the supply chain from
manufacturing and imports through distribu-
tion and logistics.
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