Commercial Investment Real Estate September/October 2018 | Page 29

U.S. Industrial Performance
Type
Total
Stock (sf)
Total
Vacancy Total
Availability YTD Net
Absorption (sf)
Warehouse &
Distribution 9.6 billion 5.2% 8.0% 44.4 million
Manufacturing 3.4 billion 3.8% 5.3% 4.3 million
Special Purpose 35.7 million 2.3% 3.3% 202,205
Totals 13.0 billion 4.8% 7.3% 48.9 million
Source: JLL Research, 1Q2018
end engineering and design, Vanchiere says. Activity in
the heavy industrial sector is being fed by abundant and
inexpensive natural gas, as well as the region’s proximity to
the 40-foot deep Calcasieu Ship Channel leading into the
Port of Lake Charles.
Heavy industrial activity is trickling down to drive light
industrial land use and office warehouse deals. Currently,
about 1,000 acres of light industrial facilities are either
existing, underway, or available, with shovel-ready sites in
the area. For example, NAI Latter & Blum is marketing the
Calcasieu Industrial Park in Sulphur, La. The more than
100-acre industrial park kicked off in 2016 for spec and
build-to-suit developments and has since broken ground on
three spec industrial buildings. The first project is nearing
completion and a fourth project will start later this year.
Utah is gaining attention for its growing Silicon Slopes
tech sector in north Utah County. That tech sector is fuel-
ing demand for flex/research and development space to
accommodate companies that are looking for office for
front-end operations, along with R&D and warehouse
space. Demand from the tech sector also is driving changes
to the type of flex space that is being built, says Mary Street,
executive vice president at Colliers International in Pleasant
Grove, Utah. New flex buildings are being built with much
higher parking ratios to the higher office and R&D use.
Traditionally, local flex/R&D buildings would have one
to two parking stalls per 1,000 sf, and now that ratio is as
high as seven to eight per 1,000 sf, she adds.
The area is attracting cutting-edge firms that also are
pushing more tech into industrial facilities. “Automation
has become incredibly important in our area. Most ware-
houses are focusing on innovation, technology and energy
efficiency,” Street says. Modern warehouses being built
are featuring everything from wireless computer systems
running conveyor belts to robots that are retrieving and
handling packages and goods. “Technology is a critical
component to our industrial growth,” she says.
Developers Navigate Market Hurdles
Developers continue to battle the usual challenges that
include rising land and construction costs and obstacles
CCIM.COM
to getting land entitled. For example, the industrial ware-
house space vacancy rate in Utah County is at 3.4 percent.
“With vacancy this low, you’d expect to see more construc-
tion on speculation. However, new construction is lagging
way behind demand for product,” Street says.
One reason is that construction costs across the board are
at an all-time high thanks to high levels of construction in
the areas across the board in resi-
dential and commercial property
development, which are straining
supply of materials and workers.
Utah’s land costs also are increas-
ing due to the demand and lim-
ited supply, Street adds. It has
been a challenge to get industrial
users to commit to sign leases 12
to 18 months ahead of a project
completion. Given the fact that it
is more expensive to build than it
ever has been, that discourages a
lot of developers from building
spec, because they don’t want to
gamble, she says.
Developers are keeping a close
eye on Washington and the ris-
ing costs of building materials
that could emerge due to a trade
war. The Trump administration announced in late May that
it would impose tariffs on metals imported from Europe,
Canada, and Mexico. “We’re very cost-sensitive, and we’re
watching commodity prices, especially with all of these tar-
iffs and the current politics that may influence the price of
steel and concrete and everything else,” Conway says. It’s
hard to tell what’s going to happen in the near future, but
that could certainly become an issue, he adds.
Another challenge for developers is that tenants in many
markets are reluctant to commit to lease space until projects
are nearing completion. “We have responded to a number
of RFPs on build-to-suit projects, but what we have found
is a lot of the RFPs are exploratory and never completed or
acted upon. Where we have had success is in leasing the
“Once we have got
slab on the ground
and steel in the air,
companies take
notice and they can
see time to market
in terms of how
quickly they can
be in a facility.”
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